Budget 2013: Government push to capture office holders in IR35 net

THE 2013 BUDGET has confirmed that office holders will be affected by IR35.

The main budget document contains a note that confirms an amendment to existing IR35 provisions will be made to equalise the tax and National Insurance treatment of office holders, “and put beyond doubt that the legislation applies to office holders for tax purposes”.

The note refers to controversial rules relating to determining whether an individual is self-employed, or employed, for tax purposes. The government, and HMRC, has looked to crack down on areas where tax and NI bills are avoided due to the person’s employment status. Their concerns revolve around the use of service companies, in which individuals serve as directors while working.

The issue hit the public’s gaze as BBC and senior government department workers were found to use service companies, and as such the IR35 legislation will impact on office holders as well – such as non-executive directors.

“This is interesting because it is the government going ahead with their proposals which follows the impact on the CEO of the Student Loan Company and the engagement of workers via personal service companies,” said Alastair Kendrick, tax director at MHA Macintyre Hudson.

“This will leave those who held a ‘office’ facing no financial advantage from the use of a personal service company. We await the legislation to see though if this will hit other groups.”

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