Conservative shadow business minister Mark Prisk this week promised to review the IR35 tax regime for personal services companies.
In a letter to the Professional Contractors Group (PCG), Prisk wrote, “A Conservative government would undertake a fundamental review of small business taxation matters, including IR35.”As a director of a limited company, it is your duty to ensure that your company pays the correct tax, and, of course, it is your responsibility to ensure that your personal tax affairs are in order. Therefore, the onus of getting the employment status of a particular engagement that your company is undertaking also falls to you.

This clearly is not always straightforward, and it is therefore highly unfair that the decision on a complex tax matter should be left to an individual whose expertise lies outside of tax. However, those are the rules and getting that decision wrong could prove costly – not only will HMRC seek to recover the lost tax and interest, but they will also seek to levy a penalty on the basis of taxpayer negligence.

It seems extremely sensible therefore to have your contract reviewed. This gives you the peace of mind to know that if your engagement does fall outside of IR35 then you can distribute the company profits accordingly. Furthermore, you have an independent opinion which shows that you have taken reasonable care to establish the tax opinion and HMRC therefore cannot justify the levying of a financial penalty.

IR35