The controversy over the meaning of the term ‘office holder’ is continuing, despite a recent attempt at clarification by HMRC prior to the forthcoming amendment to IR35 legislation.
The Revenue has defined ‘office holder’ as “a position which has an existence independent of the person who holds it and may be filled by successive holders.” According to the law firm Lawspeed, however, the clarification remains too encompassing and could be applied to just about any role.
The explanatory notes accompanying the definition shed little extra light on the matter, Lawspeed argues, merely highlighting precedent case law that HMRC believes will set tight limits around the application of the new IR35 legislation.
The position of contractors fulfilling interim director roles, Lawspeed believes, remains worryingly ambiguous, as they could very easily be interpreted to be office holders. The firm warns: “[F]irstly, policy can always be changed more easily than legislation so that the new provisions could always be applied far more broadly; secondly, the reliance on definitions born out of precedent case law indicates that future tribunals have it in their power to expand the scope of the provision depending on the facts of a case meaning contractors have little certainty.”
While the Treasury claims that it is simply making income tax legislation congruent with social security law, Lawspeed believes that the planned change will inevitably affect a proportion of contractors who occupy senior roles, especially in the interim market.
A possible solution not mentioned by Lawspeed, however, is for organisations to draw their interim talent from professionals working through Umbrella Companies, who are considered by HMRC to be employees and outside the scope of IR35.