Kingston

The Professional Contractors Group (PCG), which represents many contract and freelance workers in the UK, has urged its members to take good advice on IR35, or face the possibility of a large tax bill.

The Group has just published a new edition of its Guide to IR35, the tax legislation that governs whether contractors, freelancers and other small business owners are taxed as “employees” due to the way they work.

“Dragonfly” IR35 Case

The new publication comes at a key time following the Dragonfly case in which one contractor unsuccessfully contested a £99,000 tax bill from HMRC.

Dragonfly Consulting was hit with the massive tax bill after its director was found to have been “within” the IR35 rules during an IT Contract with the Automobile Association (AA). Rather than being viewed as “self employed” for tax purposes, the director was found to be “employed”, despite running his business via a limited company.

Take Sound Advice

MD of the PCG, John Brazier, said: “It’s still entirely possible to work outside IR35, despite the shock of the Dragonfly case earlier this year. What that case showed is that the traditional advice remains sound, but must be followed thoroughly and carefully.”

The new version of the IR35 Guide clarifies issues such as the importance of the “upper” (agency-client) contract matching the “lower” (limited company-agency) contract which the freelancer actually signs, and the need to be able to demonstrate through “real arrangements” letters or other documentation that the reality of what happens tallies with what the contract says.

It also emphasises that the “big three” indicators of whether you might be caught by IR35 or not are: personal service (or “substitution”), direction and control, and mutuality of obligation. You can read more about these indicators in our guide to IR35 and employment status.

Members Login

Latest News