TaxPersonal TaxIR35: Contractors escape double tax hit

IR35: Contractors escape double tax hit

The taxman has made a last minute change to its notorious IR35 rules to save some building industry taxpayers from being stung with tax rates of up to 60%.

An estimated 4,000 tax payers subject to IR35 tax rules for personal services companies are also included in the Inland Revenue’s construction industry tax scheme, under which they suffer 18% tax deductions on payments they receive from contractors.

The interaction with IR35 meant they would have been liable to tax of up to 60% of their income. Repayment of the 20% or so they would have overpaid could have taken up to two years, causing severe cashflow problems.

Under a new concession, those hit by the double tax hit can apply to offset repayments due under the construction industry scheme against their IR35 liabilities.

The move has been welcomed by tax experts, although they commented that it had come very much at the last minute.

Anne Redston, Ernst & Young partner and Chartered Institute of Taxation personal tax spokeswoman, said: ‘The interaction between the two schemes could have led to subcontractors experiencing catastrophic cashflow effects.’

She added: ‘Subcontractors and their accountants should not lose any time in considering whether they are eligible for this concession. If they are eligible they should put in a claim as soon as possible.’

Links

More details at www.inlandrevenue.gov.uk

Exclusive – Businesses to take 60% double tax hit

Related Articles

Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

Personal Tax Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

4w Alia Shoaib, Reporter
Rent-a-room relief – the survey says…

Personal Tax Rent-a-room relief – the survey says…

2m Helen Thornley, ATT Technical Officer
What should the OTS prioritise in its review of inheritance tax?

Personal Tax What should the OTS prioritise in its review of inheritance tax?

4m Alia Shoaib, Reporter
LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

5m Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

6m Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

7m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

8m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

9m Alia Shoaib, Reporter