Businesses warned to prepare for IR35

ACCA head of taxation Chas Roy-Chowdhury said companies must ensure sure they pay the correct amount of PAYE by this date at the latest.

He added: ‘This is an important and early deadline. Companies must analyse and evaluate those of their engagements which fall under the scope of the IR35 provisions in order to calculate the PAYE involved.

‘IR35 was designed to catch out individuals in full-time employment who said that they were freelance or self-employed. ACCA believes the government and the Inland Revenue have fundamentally misjudged what is really happening here.’

ACCA also expressed concerns about the impact of IR35 on income and corporation tax self-assessment.

Roy-Chowdhury said: ‘IR35 mistakes made under the self-assessment arrangements could prove to be a ticking time-bomb. If errors are made, they could lie undetected for years only to detonate in the future at huge expense to the individual or company concerned.’

ACCA, along with the ICAEW and other organisations including the Professional Contractors Group, the Confederation of British Industry and the Federation of Small Businesses campaigned against the introduction of the scheme, calling it fundamentally unjust.

IR35 regulations came into force in April last year, and removed many of the tax advantages previously held by contractors who operated through personal service companies.

Many believe it is unfair because it taxes one-person businesses more harshly than other organisations. Organisations such as the PCG have also argued that IR35 discourages contractors from trading in the UK and claims it contravenes the Human Rights Act. The PCG will be challenging the government in the High Court in March.

But the Inland Revenue has defended the legislation saying it ensures everyone who meets the accepted definition of employees paying tax on broadly the same basis.


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