London Chamber of Commerce, Tuesday 22 January 2013
Around 20 delegates braved snowfalls and icy conditions to attend an important seminar about the IR35 tax law and its implications for contractors.
Adrian Marlowe, MD, and Ben Grover, Senior Legal Consultant with recruitment law experts Lawspeed, outlined the history, significance and impact of this tricky piece of legislation.
The desire to remain outside of IR35 jurisdiction was underlined by the fact that the tax liability for a contractor on approximately £67,000 per year can be as much as £10,000, making a huge difference to annual income.
There is also a National Insurance Contributions (NIC) element to IR35 which can further impact a contractor’s net pay.
From a recruiter’s point of view, IR35 has commercial implications because remaining outside of it makes assignments more attractive to candidates and helps to keep down the costs to Hirers.
The proposed changes to IR35 form just one small part of the 1,078 page Finance Bill which is currently at the Consultation stage and is expected to become law in April 2013.
The proposed legislation will introduce a new test of whether the contractor is an ‘office holder’. Adrian and Ben used past case examples to demonstrate how IR35 rules have been interpreted by Tax Tribunals over the years. Looking again at cases where contractors have been successful in the past it became clear that the judgements could well be different once the Finance Bill 2013 passes into law.
It became clear that the application of IR35 will be significantly extended by the proposed legislation, even though the government implies that the changes are only minor.
It was agreed, with some alarm, that we could be looking at significant changes to the recruitment industry if the law is passed without amendment. For instance, more experts may choose to take permanent employment or rates may be forced up to compensate for the increased tax contractors will have to pay. One delegate suggested that some may choose to relocate overseas.
Could it be that The Treasury has underestimated the impact and ramifications of this piece of legislation?
The good news is that the Association of Recruitment Consultancies (ARC) is gathering industry feedback on this issue and will respond formally to the government with their recommendations and amendments before 6 February.
To find out how the proposals could affect you and your business, get in touch with our IR35 tax specialists to see how Lawspeed can help. Email [email protected] or call 01273 236 236.
Adrian, a highly experienced lawyer, founded Lawspeed in 1997. He is responsible for developing our extensive portfolio of products and services, including the widely used Lawspeed contract templates. Adrian is an expert on “recruitment law” and specialises in contracts, regulatory compliance, employment status and dispute handling. He is chair of the trade body the Association of Recruitment Consultancies, the only lawyer lead recruitment trade body in the UK. Adrian and his co-director Ravi devised Standards in Recruitment as a vehicle for helping drive up standards and compliance in the industry.
Adrian is our lead in discussions with the government over regulatory evolution. Apart from assisting with client support, Adrian’s primary role is research and development into methods of business delivery, our latest service Proterms being his most recent project. Adrian heads our IR35 lawyers team.