1. IR35
Legislation & Impact
January 2013

2. History of the changes to IR35
Office of Tax Simplification Review
• When the coalition took office they asked the OTS to review IR35 with a view to
abolition
• The conclusion – there is no easy answer!
Budget 2011 Announcement
• Decisions was to retain the legislation in its current form but that HMRC would
improve their administration of it
Setting up and Working with the IR35 Forum
• Includes a number of ‘experts,’ accountancy professionals and lobby groups
• Provide a challenge function and hold HMRC to account on meeting their
commitments in improving the administration
Budget 2012 Announcement
• Strengthening specialist compliance teams
• Simplifying the way IR35 is administered
• Consultation on the taxation of controlling persons

3. Changes to HMRC’s Administration of IR35
Refreshed RIS profiling for potential IR35 risk cases
• New Employment Anti-Avoidance Teams (EATs) based in LC Specialist
Employer Compliance unit
• Changed what we ask at the start of an enquiry
• A commitment to quickly withdraw where it is clear IR35 is not an issue
• Quicker use of our information powers when we meet with delaying tactic
• Strengthening of our helpline and contract review service
• Development and of new ‘business entity tests’
• New guidance on IR35
• Where someone has been through an enquiry and found to be outside of
IR35 an undertaking that providing their working practices do not change
we will not open another enquiry for IR35 reasons for the next 3 years

4. Business Entity Test
What are they?
• One of a number of tools to help people working through their Personal
Service Company to better understand their tax obligations and provide
greater certainty
• Series of 12 questions that provides a points score
• The more points you have the lower the risk you are of having an HMRC
investigation for IR35 reasons
• If you are in the low risk category and HMRC open’s an investigation and you
provide satisfactory evidence that you are low then HMRC will close the
investigation and have undertaken not to open another investigation for 3
years providing your circumstances do not change
What aren’t they?
• They do not tell you if you need to operate the IR35 legislation
• You could be high risk and outside of the legislation
• They are not a benchmark of risk to help you decide if you are within or
outside of IR35

5. Consultation on the Taxation of Controlling Persons
Review of Tax Arrangements of Public Sector Appointees
• HMT led review
• Did not seek to find any evidence of tax avoidance as this is the function
of HMRC – but did find there was a lack of transparency, that those who
are not on the payroll are meeting their obligations
• Found 2,400 cases where people were engaged in the public sector but
not on the payroll
• Made a number of recommendations which Departments are in the
process of implementing so they can have assurance that tax obligations
are being met
• Final recommendation consultation on taxation of controlling persons

6. Changes to IR35
Consultation on the Taxation of Controlling Persons
• Suggestion that all the most senior ‘controlling persons’ should be placed
on the payroll of the engaging organisation
• This proposal was consulted on over the Summer with the response
document issued alongside the draft legislation in December
Changes to IR35
• Following the consultation the Government decided that they would not
legislate for controlling persons at the current time but instead would
strengthen the existing IR35 legislation to put beyond doubt that it
applies to office holders for tax purposes.
• What these changes mean in reality

7. Any Questions?

8. Thank you
Liquidity Group
Baskerville House
Centenary Square
Birmingham
B1 2ND
trichardson@liquiditygroup.co.uk

9. Employment Intermediaries
Presentation
January 2013

10. What’s in a name
• Many generic labels are given to intermediaries
• Umbrella
• Pay day by pay day model
• None of the names given have been statutorily defined
• They mean different things to different people
• What is important are the facts of the arrangement
• HMRC will always consider the actual facts of the arrangements NOT the
model/scheme the company says it is operating
• Always need to consider precisely how the arrangements are structured

11. Buyer Beware!
HMRC does NOT kite-mark schemes and does NOT
provide generic advice that a ‘scheme’ or ‘model’ is
compliant
• You will often see:
• We have leading counsel’s opinion
• HMRC has agreed our model is compliant
• HMRC will not pursue you or your end client for arrears should they
arise
• Bold statements by the promoters are no guarantee
• HMRC will always determine the facts of each individual case

12. Dispensations
What are they?
• A dispensation dispenses an employer’s statutory obligation to report
taxable expenses to HMRC at the end of the year – where HMRC is
satisfied that those expenses qualify for a relief
What aren’t they?
• They are not an HMRC kite mark
• They do not allow an employer to do what they like with expenses once
they have attained a dispensation
HMRC action
• HMRC will check that an employer is using a dispensation in accordance
with the terms under which it was issued
• If the employer is not acting in accordance with the terms then HMRC
may hold the employer responsible for any tax and National Insurance
underpaid and may revoke the dispensation

13. Offshore Intermediaries
What is an offshore intermediary?
• I would characterise this a company which is the employer of a UK worker but
who bases themselves outside of the UK and the EEA
They promise….
• Many of these companies claim that there is no liability for them to pay employer
National Insurance – if they have no place of business, presence or residence in
the UK there is no obligation on the offshore employer to operate PAYE or pay
employers National Insurance Contributions
• These companies also claim that no PAYE/ NICs liability will arise on any of the
UK companies in the contractual chain
The reality….
• Where the employer is truly offshore HMRC can use the host regulations
together with the agency legislation to place this PAYE/NICs charge on the UK
employment business
• Alternatively we can use the host regulations to place the charge on the UK end
client.

14. Any Questions?

15. Thank you
Liquidity Group
Baskerville House
Centenary Square
Birmingham
B1 2ND
trichardson@liquiditygroup.co.uk