Further light has been shed on just how the government plans to strengthen IR35 legislation following the publication of the draft Finance Bill 2013 on 11th December.
Contractors who are not Umbrella Company Employees but who work instead through their own limited companies look certain to lose their exemption from IR35 if they are designated as ‘office holders’.
HMRC defines an office holder as anyone who occupies an organisational role that is independent of the person who fills it; in other words, a position that remains in an organisation after it has been vacated by the current staff member and can be filled by a successor. Such roles include veterinary inspectors, coroners, sub-postmasters, chairpersons, company secretaries and company directors.
The update to IR35 was mooted by the Chancellor in the Autumn Statement last week, in which he announced that the much-criticised ‘controlling persons’ proposals were to be ditched in favour of HMRC’s new IR35 policing methods; however, he also added: “The government is strengthening the existing intermediaries’ legislation (IR35) to put beyond doubt that it applies to office holders for tax purposes.”
The new revision to IR35, which will take effect from April 2013, brings to an end the previous arrangement in which office holders were not required to pay the income tax component of IR35. They were, however, required to pay NICs on income derived from office holding roles as well as on any associated consulting fees.
The media furore surrounding the ‘Ed Lester affair’, which spread to other off-payroll remuneration arrangements in the public sector, appears to have stirred the Chancellor into taking this course of action.