IR35 Uncertainty Is Unresolved: No Guidance For Consultants

by Jason Gorringe, Tax-News.com, London

01 May 2001

Just as Inland Revenue chief Nicholas Montague was busy writing to the Mail on Sunday to complain about an article which said there was still uncertainty regarding the application of IR35 (the legislation which 'looks through' sub-contract agreements to turn self-employed contractors into employees in many cases), his Minister Dawn Primarolo was telling the House of Commons that the wording of the Employment Status Manual regarding the interpretation and application of the law on employment status is still being reviewed.

Mr Montague wrote: 'It is misleading for Jo Thornhill to suggest that there is any remaining uncertainty over IR35. The High Court has confirmed unequivocally that it is valid in law, and people must now comply with the obligations which it imposes.'

'We will be looking at whether we need to improve the guidance which we give the public and our own people, in the light of the judge's remarks. But the basic tests for determining whether someone is employed or self-employed for tax and national insurance purposes remain unchanged. Everyone affected by IR35 needs to work out how much tax and national insurance they owe us and pay it by 19 April. If they need help, they can ring our Helpline on 0845 303 3535, or visit our website at www.inlandrevenue.gov.uk' (where they won't get any help at all since the relevant section is being redrafted).

The Revenue's attitude is specious, given that the judge who heard the IR35 Judicial Review was critical of the Employment Status Manual and other Revenue commentary, calling it 'highly misleading'.

Meanwhile, Tory leader William Hague promised again, during a speech to the Centre for Policy Studies in London last Thursday, to abolish the IR35 legislation if the Tories come to power. Unfortunately for the self-employed, this is not probable, and they will have to try to decide whether or not they are 'caught' by the new legislation. For many of them, the ambiguities and complexities of IR35 and surrounding legislation will be such that they will be obliged to take (expensive) advice from professional advisers, which in all too many cases is likely to err on the side of caution, often forcing them into the PAYE net even if they weren't actually intended targets of the legislation.

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