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Latest news suggest that a staffing body yesterday approached the government to try to clarify last year’s statutory change to IR35 over concerns that the amended legislation could end up catching “many contractors”.

The Association of Recruitment Consultancies said the proposal from HMRC to bring ‘office holders’ under IR35 was too broad and could be left open to interpretation. The issue seems to be caused by section 5(3) of ITEPA – where the definition of an office worker is provided, the ARC said, “Passing it unchanged would represent a ‘significant extension’ of IR35’s application”. By placing the term ‘office’ in IR35 to include “any position” with an “existence independent of the person” holding it and which “may be filled by successive holders,” could cause issues for recruitment consultants too.

“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 solution is to amend the legislation to make sure that ‘office’ is clearly defined… [Or] it would be helpful if [officials] could clarify the aims behind the proposal and its meaning.”

The chairman of ARC, Adrian Marlowe, stated that some experts say case law already states the definition of what an ‘office’ is, which means this should limit the number of contractors affected.  However based the few IR35 cases that have happened to date, he fears that new “judgements could well be different [to case law] once the Finance Bill 2013 passes into law.” 

Fortunately, the Treasury is “not planning” to use last year’s amendment to “scoop more contractors into IR35 tax rules”, the ARC conceded, citing a “government source”. However the wording within the section of the government’s proposal has been left so open that it could result in many contractors being caught by the new legislation. At the very least the amendment suggests “there will be no let-up in HMRC’s focus on IR35 arrangements and reliance on the IR35 legislation.”

If you want to know more about IR35, please download our Guide to IR35.

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