IR35 in Brief

As you will undoubtedly be aware, the last 18 months has seen some major changes regarding the IR35 legislation. As a result of the variations that occurred throughout 2012, a clear rise in tax enquiries, and of course the first official change to the IR35 rules since 1999, HMRC have certainly created concern throughout the contracting community.

Looking at the activity surrounding IR35 throughout the year, a clear pattern emerges regarding HMRC’s interest in the legislation and perceived tax avoidance.

Business Entity Tests

The ‘Business Entity Tests’ were introduced back in May as an attempt to create a tool in which contractors can establish their own status based on a simple points system.

Contractors within the public sector have come under close scrutiny throughout the year and in September 2012 the Public Sector Guidelines were introduced following significant media attention concerning a number of high profile public figures.

As for the future of IR35 and what 2013 will bring, the likelihood is that we will see a significant increase in the number of IR35 enquiries being undertaken, with HMRC having set up three new specialist teams solely tasked with status issues.

Following recent announcements regarding IR35 changes in George Osborne’s autumn statement, it is evident that HMRC are on a clear mission to tackle tax avoidance. So it is more important than ever for contractors to ensure that they have fully considered their status and are confident that, in the event that this is challenged by HMRC, there are grounds to mount a successful defence.

By:Steven Bailey

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