HMRC is planning to bring forward further guidance when and how IR35 rules will apply to office holders and directors providing their services through limited companies.
Contractors and their accountants are anticipating that Budget paperwork will include the promised clarification for changes in the Finance Bill 2013.
There is a strong possibility this call will be answered on Budget day. A departmental spokeswoman told AccountingWEB this week, “HMRC plans to publish further guidance shortly on the change to IR35 explaining exactly what it means and providing clarity about when it will apply.”
But some are already warning that the new approach could herald more restrictions on contractors and increased IR35 tax investigations.
Draft Finance Bill 2013 clauses, published on 11 December will amend the IR35 rules to clarify that the existing provisions apply to office holders as well as employees.
Gabelle director Martin Mann explained in a recent tax analysis on AccountingWEB, prior to the Finance Bill 2013 amendment an office holder such as a director would not be considered to be an employee for IR35 purposes.
“It is clear that HMRC want to make IR35 more effective in attacking personal service company arrangements, and we should expect to see increased activity in this area,” Martin wrote.
Cheapaccounting.co.uk’s Elaine Clark recently warned that she knows of two contractors in the public sector whose details have been passed to HMRC by their clients – a government department and a government agency.
“If you’re a contractor you really need to think twice before working for a government agency which may give your details to HMRC,” Clark said.
About Nick Huber
I’m a specialist business journalist and have a particular interest in tax and technology.