Budget seeks to close loophole for contractor 'office holders'

26th March 2013

Contractors were left dissatisfied last week after Chancellor George Osborne’s Budget reiterated that IR35 rules would be amended to apply to them, in their position as 'office holders' to their clients.
 
This is to be delivered as opposed to the new guidance previously promised by HMRC.
 
The proposal is expected to go ahead as planned within the Finance Bill 2013, relating to ‘Personal Services Companies and IR35’ and is likely to be unveiled on March 28 or before.
 
The current loophole within IR35 legislation enables limited company contractors acting as 'office holders' to be exempt from such regulation.
 
Martyn Valentine, of IR35 advisory, The Law Place, said: "The Budget 2013 reiterates the government’s intention as already stated in the Autumn Statement in 2012 to amend the IR35 legislation to end the loophole which currently exempts limited company contractors acting as ‘office holders’ of their client from the scope of the IR35 legislation.

"Once this amendment has been enacted it is likely that such contractors will either pay additional tax [under IR35] or consider other arrangements, perhaps even employment."
 
Contractors caught by the extension to the IR35 rules could now be those working at a client company, even as one of its ‘directors’, in line with the Treasury’s guidance that ‘office holders’ are senior personnel occupying specific roles.
 
Interim Partners, a provider of professionals for short term work placements, spoke out in concern for its members, insisting senior figures should not be treated the same as payroll employees.
 
A spokesperson said: "Senior interim managers should not be treated as payroll employees, because they just aren’t the same.
 
"Interims working at a senior, office holder level, are used by businesses to meet short term challenges with a very specific skillset that the business usually can’t access on the permanent market.

"Frankly, it’s ridiculous to think they should be taxed like permanent employees."
 
Freelancers looking for financial advice and guidance before taking on their next project can turn to us at TaxAssist Accountants. We help contractors with all accountancy and tax requirements including a review of your IR35 legislation position.

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