March 18, 2011
The Office of Tax Simplification issued a statement last week in relation to its awaited report on simplification of the IR35 rules for contractors.
The Office has stated that it intends to publish its Interim Report in time for the Chancellor’s Budgetary Statement on March 23rd.
The IR35 rules are used to determine whether independent contractors are treated as self-employed or employees for tax purposes. Whereas independent contractor are responsible for paying their own income tax and National Insurance contributions, employers must make such payment for employees by way of PAYE and National Insurance. The consequence of a contractor actually being found to be an employee could be a hefty tax bill for the employer so it is important that the correct arrangement is established at the start. The label given to a worker is not conclusive in this respect and the rules take account of all the factual arrangements concerning the working relationship. However, at present the rules are complicated and difficult to apply, relying on case law to ascertain how a given worker is to be treated.
It is hoped that the Office of Tax Simplification’s amendments will achieve a more workable solution as we will report on any further details as they are published.
An employment solicitor can assist with drafting employment contracts and contracts for contractors that are IR35 compliant.
