IR35 and associates

26 September 2001

Issue: 3826 / Categories:

Company A is a trading company with fifteen employees providing consultancy services and equipment to clients. Company A is owned equally by two individuals, Fred and Joe, who are not associates. Fred only is a director of Company A. Joe (who is not a director of Company A) also has his own wholly owned Company B which has various business interests but also provides his consultancy services to Company B and invoices Company A accordingly.

Are these two companies to be treated as associated such that the IR35 legislation does not apply or does Joe need to consider IR35 in relation to the services he provides through his own Company B to Company A?

The Revenue's Employment Status Manual at paragraph ESM3105 refers to section 839 Taxes Act 1988 when considering the connection between the two companies and if they are associated. Under section 839(7) are Fred and Joe connected with one another with respect to Company A as two or more parties acting together to secure control of Company A? Under section 839(6) is Company A connected with Joe if Joe and persons connected with him together control Company A and if Joe is deemed connected with Fred under section 839(7) then is Joe deemed connected with Company A? Under section 839(5) is Company A...

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