Anxieties have been proliferating in numerous Tweets, blogs and even news posts that a general anti-avoidance rule (GAAR), which George Osborne may include in the March Budget, will be added to IR35 to police contractor employment status. However, according to a number of experts, the fears are totally unfounded.
John Whiting, the director of the Chartered Institute of Taxation (CIOT), told Contractor UK “I do not think contractors need to worry about the GAAR when it comes to employment status unless they are using some very artificial structure.”
He added “We are likely to see the GAAR concept taken forward in the coming Budget… [but] I cannot see that it would be used to target, for example, the simple issue of deciding to work through a company. Similarly, I don’t see that a GAAR would police employment status as such – surely case law will continue to do that.”
PAYE umbrella contractors and most freelancers who work through limited companies will be unaffected by the rule, according to Paul Mason, contracts manager at the specialist IR35 compliance company Abbey Tax, “unless they are looking at the offshore trust-type of arrangements.”
The rule has been proposed for inclusion in the March Budget after an extensive study by Graham Aaronson QC. John Whiting went on to explain that the aim of the proposal was to target and deter contrived schemes using “a very artificial structure”; contractors who decide to work through a company will not, he believes, be caught up in it. There are, he added, “a myriad of rules, IR35 and MSC in particular, that police that area.”