Revenue rebutts English ICA IR35 criticism

An extract from a letter sent to the institute by the Revenue, expresses disappointment and surprise at the faculty’s analysis which gave IR35 only 30 points from a possible 100.

A spokesman says in the letter: ‘I was particularly surprised at the repeated suggestion that the government’s policy intention was not clear, when the use of service companies to avoid tax and NIC has been well known to the accountancy profession for years.’

Additionally the Revenue claimed a number of points in the booklet were not correct. ‘Most importantly, it says that the Revenue have taken the view that if the worker is acting through an agency, he or she will be treated as an employee whatever the contract says,’ the letter says.

The Revenue claims it has given advice which only relates to the standard agency contract which was – and still is – common in the IT industry.

‘We have said that where there are engagements of more than a month on these terms, which specify a set number of hours per week, on the client’s premises, for an agreed hourly rate; require the worker to act under the control of the client’s staff; and do not allow substitution, our opinion is likely to be that they meet the definition of employment,’ it states.

The Revenue also claims accountants have over-egged alleged problems with he interaction between IR35 and the construction industry.

The Revenue dismisses the suggestion that the application of the agency rules in partnership cases could result in a situation where both the agency and the partnership had to operate PAYE on the same amount.

The claim that both the client and the intermediary could be liable to operate PAYE on the same amount, where the intermediary is based overseas, was also rejected.

The Revenue letter said officials also felt the English ICA had exaggerated the problems associated with calculating the correct amount of the deemed payment in time to account for PAYE on 19 April.

Finally, the Revenue said the booklet was incorrect on the question of appeals where income from a contract is apportioned between two workers, or where an inspector grants relief of tax on distributions to prevent double taxation.

Revenue letter to English ICA

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