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This week's opinion: 26 September 2019

23 September 2019 / Andrew Hubbard
Issue: 4713 / Categories: Comment & Analysis
Time to rethink the IR35 rules

The latest twist in the IR35 saga – the decision on the personal service companies (PSCs) of Joanna Gosling and others – only complicates an already confused situation. It was a split decision, decided by casting vote. As many people have said: how can businesses be expected to make decisions on such matters if experienced judges can disagree after hearing evidence over two weeks?

There should be a mechanism to prevent blatant avoidance of tax when people dress up what is clearly employment income by using a PSC. If I turned at the Taxation office next week wearing an Andrew Hubbard Ltd badge but continued to work exactly as I previously did, under the same terms and conditions, it is right that I should be challenged: that is the Friday-to-Monday scenario which drove the introduction of IR35. But things are rarely that straightforward. The decided cases show that tiny nuances in working arrangements can have a wholly disproportionate effect. From next year (most) employers will have to deduct tax for PSCs. That moves the problem to a different space, but it will not make the position any clearer.

PAYE and National Insurance receipts underpin our economy and it is understandable that the government wants to protect them. But in trying to do that it has created a system of such incredible complexity and confusion that nobody (including I suspect many in HMRC) can really believe it is fit for purpose. I simply do not believe that a system based on the current IR35 rules – even after revision for public and private sector employers – can ever work. It is time for a concerted effort by all parties to rethink the whole issue.

If you do one thing...

If you want to see how a tax can be successful read the report on the soft drinks levy ( Will food be next?

Issue: 4713 / Categories: Comment & Analysis
1 Comments Hide
RICHARDCURTISX, 10/01/2019 18:03:23

Having just read the above I could not agree more. A company client with two director/shareholders undertook some media relations work for a university, developing materials to send to journalists and suchlike. The work was carried out by a team of three. It was blatantly not within IR35, but the university deducted income tax and National Insurance. The remittance advice was sent out in the name of the company, but the university included the name of one of the directors on its payroll. We asked why the university had done this. The response was that it was told to do this with all outside contractors. It was abundantly clear that it had not even considered whether IR35 was in point. What made it worse was that, because the director was put on the payroll, HMRC now thinks this is continuous employment and has issued a new code against the company payroll increasing the tax on the director's monthly salary. Despite advising HMRC of the situation it will not revise the code until a P45 is sent. This is just getting stupid. Pat Cobham, Cobhams Tax Consultants and Accountants.

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