The 2011 Budget confirmed that the IR35 rules won’t be scrapped. Iinstead the administration of the system is to be improved. Spo what does this mean for your business?
The IR35 rules were introduced a decade ago to stop PAYE tax and NI dodging by running businesses through a limited company or partnership. If your company or partnership provides services, anything from property maintenance to staff training, then you need to consider the IR35 rules. These can impose PAYE tax and NI on your freelance income where it’s provided under conditions which would normally be considered an employment.
So what is going to change? Well, at this time, the only certain changes are those announced in HMRC’s Budget press release, in particular HMRC will:
1. “Provide greater pre-transaction certainty, including a dedicated helpline staffed by specialists.
2. Give greater clarity by publishing guidance on the types of case HMRC views as outside the scope of IR35.
3. Restrict reviews to high risk cases carried out only by specialist teams.
4. Promote more effective engagement with interested parties through an IR35 forum to monitor HMRC’s new approach.”
The good thing is that improved IR35 administration will mean fewer enquiries from HMRC. But of even more importance will be point 2 above: specific guidance on situations which fall outside IR35. If you can make your own situation look similar to one of the examples that will be published by HMRC, it should be easier to prove that you are outside the scope of IR35.
