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IR35 and the false self-employment test

Author: Mark Thomas
Date: 29th December 2013
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Any contractors working via their own Limited Companies will be familiar with IR35. However, proposed legislation has the potential to change the situation quite dramatically.

IR35 has been with us for quite some while now and, whilst it is not necessarily a welcome subject for many, proposed changes to introduce a false self-employment test and who will be responsible for policing it could affect many contractors working via agencies.

If the proposed legislation is enacted as it is currently written, it will be the agencies who will have the burden of proving an absence of control over the contractor by the client and they will also be responsible for paying the extra tax should the contractor be found to be caught.  Clearly the agencies will not, under these circumstances, want to accept any potential responsibility or liability and will therefore, by default, deduct Income Tax and National Insurance Contributions via PAYE from any contractors working via them.

It is hoped that, during the consultation phase of this legislation, HMRC will listen to the experts and others who will be affected by these proposed changes.  However, it is highly unlikely that the proposed legislation will be dropped in its entirety and therefore some degree of change will probably occur.  We will have to wait and see quite how much does change and what the impact it will have.

You can read a bit more about the proposed changes here: http://www.contractorcalculator.co.uk/false_self_employment_test_ir35_clash_457310_news.aspx .

Alternatively, give us a call if you want to discuss it in more detail.

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