As delivered in his Autumn Statement yesterday, George Osborne has revealed that he has dismissed the proposed Government application to tax ‘controlling persons at source’.
Paragraph 2.103 revealed that the government "has decided not to proceed with the proposal to tax those who meet the definition of a controlling person at source".
This decision has affected those who are office holders in their client’s organisation, the original proposals targeting these who came as a direct response to continuing activity in the media regarding public sector workers labelled as using limited companies as a method of tax avoidance.
The Treasury further clarified this, releasing a statement that advanced their reasons, explaining why proposals were not being implemented. “HMRC’s new approach to policing IR35, along with the measures introduced in the public sector this year, are sufﬁcient to prevent the loss through disguised employment in this way”.
This unanticipated declaration comes as a result of HM Revenue & Customs’ recent changes when policing IR35, and the news will no doubt fall on the welcome ears of many advisers, after criticism arose earlier in the year concerning increasing amounts of ‘bad publicity’ surrounding senior civil servants being paid through personal services companies.
Seb Maley, Associate Director at Qdos Contractor and experienced IR35 specialist commented on the autumn statement’s effects on contractors, saying “The fact that the controlling persons proposals have been shelved proves that the Government is confident in HMRC’s policing of IR35.”
The future of IR35 is of course not a clear vision, but the statement issued by the Chancellor said that the government intends to strengthen the existing legislation.
“The Government is strengthening the existing intermediaries’ legislation (IR35) to put beyond doubt that it applies to ofﬁce holders for tax purposes”.
This final statement adds another air of mystery, and could be significantly relevant to recent developments such as HMRC’s Business Entity Tests, or it could infer that something else entirely is being planned by the Treasury. Regardless of this, it remains to say that HMRC are being as elusive as ever.
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