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IR35 quandary: Company size confuses experts

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Generally, I’m not confused by the impenetrable labyrinth that makes up the UK’s tax system. But I was not prepared for the Kafkaesque tentacles lurking in the off-payroll working rules.

27th Jul 2021
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The question

A tax partner in a firm of chartered accountants asked me this question: 

‘When deciding whether a company is small or not, and so outside the new off-payroll rules, one looks at the whole group and applies the size tests to that, but what happens when you have two companies that are under common ownership but not in a group?’

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Replies (4)

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By johnjenkins
28th Jul 2021 10:13

All Accountants and tax advisers know that IR35 shouldn't even be anywhere near the statute books never mind coming into play.
To take away the status of a legal entity (Limited company) beggars belief and our bodies allowed it to happen.
I've said this many times and I'll go on saying it. EMPLOYMENT STATUS IS A COMMERCIAL DECISION AND NOTHING TO DO WITH HMRC end of.

Thanks (9)
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By adjadj
28th Jul 2021 10:23

The connected person test is unworkable. Perhaps an accounting group should ask the following question of the Treasury. When deciding to introduce a connected person test what consideration was made as to how this would work in practice and what estimate was made of the revenue potentially lost by people subdividing operation in order to game the system

Thanks (5)
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By Hugo Fair
28th Jul 2021 10:59

In order for the turnover of 'connected persons' to be treated as relevant to the 'turnover test', don't the businesses of those people have to be in the same or related 'line of business'?
I know that's yet another piece of woolly wording to add to the shaggy-coat already in place, but it would at least be more logical in the context of trying to prevent people subdividing their operations solely in the hope of being defined as an SME?

Thanks (3)
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By IR35
02nd Aug 2021 22:36

This is a bit like North Korea, where all family members and associates face the literal chop should any commit a word against the great leader.

IR35 is as my own name suggests a Bad Idea...

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