From the Desk of the MD…

This month…

The Off-Payroll new legislation goes marching on…

There continues to be plenty of speculation about whether there will be an 11th hour reprieve from this ridiculous tax.

We have a new Government, now a new Chancellor but it must be extreme wishful thinking that there will be a change in thinking at the Treasury, which continues to be the driving force behind this. Bless them!!

Last week in Parliament, the Right Honourable Jesse Norman MP, Financial Secretary to the Treasury, in response to an MP’s question regarding concern over blanket determinations being made by end client companies answered “we’re not aware of blanket determinations being made although it must be said that many firms are acknowledging disguised employees and bringing contractors in-house”.

Incredible that in his exalted position, no one has made him aware of the hundreds of end client companies who have told contractors, without any discussion, that they will not work with them in their limited companies after April.

These are blanket bans NOT as he says. It’s not contractors that are disguised employees, but his words that are disguised excuses for the abuse of the law for the benefit of the Treasury.

But as angry as we may be, we need to be practical. The legislation looks to come in from April.

However, there are end client companies that are doing fair IR35 reviews and often finding that contractors are outside IR35 and that the new rules will not apply.

Companies not doing fair IR35 reviews may find it hard to keep their contractor workforce, who in the immediate future may need to reluctantly accept the inside IR35 status, but no doubt will be keeping an eye on contracts elsewhere, which are listed as outside IR35. The commercial pressures may make them soften their attitudes.

In addition, we may see many contractors appealing the inside IR35 determinations imposed on them without their agreement.

This appeal can be done for a few years after the event. I have found an interesting comment on the HM Revenue & Customs (HMRC) Employment Status Manual guidance (ESM10035) relating to accounting in a company for the IR35 tax, that suggests HMRC recognises and expects that there will be times that IR35 should not have been applied resulting in tax and NI refunds:

If after filing accounts the circumstances change and the engagement should not have been one to which Chapter 10 applied, and tax and NICs are refunded, the necessary corrections to the accounts and tax computations must be made to reflect the new position, as the relief would no longer be due.

My advice at this stage is:

  • Do what you can in the remaining few weeks to negotiate with your end client to do a fair IR35 review.
  • Use our specialist IR35 guidance at no cost to you to assist you.
  • If you are deemed inside IR35, keep your limited company open both for other work that is outside IR35 and for the possibility of appealing and getting refunds of tax and NI in the future.

Victor Korman
Managing Director
Cogent Accountants