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New IR35 clause ‘nothing to worry about’ for vast majority

The expansion of the IR35 legislation to include ‘office holders’ – the first ever statutory change to the Intermediaries Legislation – should not be a concern for ‘genuine’ contractors, says a leading accountant.

Commenting on the inclusion of a new clause in the Finance Bill 2003, to extend the current IR35 rules to include individuals working in the most senior roles within organisations, Derek Kelly, MD of ClearSky Accounting, said that nothing had changed for the vast majority of contractors and freelancers.

The accountancy firm pointed out that the legal change was more of a ‘tidying-up exercise’ than anything – and represented the Government’s attempts to ‘strengthen IR35’, rather than implementing another set of separate rules to tackle disguised employment by ‘controlling persons’.

Kelly said that the draft clause “serves to strengthen IR35, and reinforces the principle that someone who is part and parcel of a business will be deemed to be ‘inside’ the legislation.”

Clearly, the legislative addition also demonstrates that HMRC is keen to overhaul the way it polices IR35, in line with changes made to the IR35 regime in May 2012 which included the creation of specialist IR35 compliance teams, and the introduction of the ‘business entity test’ which shows participants the risk they face of being selected for an IR35 investigation.

Kelly is keen to inform contractors that the recent changes in the way IR35 is administered, together with this latest change to the Intermediaries Legislation itself, should not create ‘unnecessary anxiety and confusion’ in the contracting world:

“… the fundamental fact still holds true: if you are a genuine contractor working for a range of clients through your limited company, and are not attempting to disguise employment, you have absolutely nothing to worry about.”

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