Written by Andy Vessey
Those of us expecting some detailed guidance on what an ‘office holder’ looks like will be disappointed with HMRC’s offering of yesterday. Nearly a week after the Budget HMRC released further information regarding the imminent extension of the IR35 legislation from 6th April 2013, which essentially amounts to two FAQs about when and what the changes are.
Rather than providing a definitive portrait of an office holder HMRC tell us that IR35 will also apply in the following situations:
▪ A worker is personally appointed to perform the duties of an office.
▪ An intermediary is appointed as a corporate office-holder, provides the worker to perform the duties of that office and the worker’s personal services are required.
▪ A worker is engaged both as an office-holder and to perform other duties in circumstances when they would be regarded as an employee if they were engaged directly by the client. (For example, a director also engaged as a CEO who has some duties arising from their office but in addition has managerial duties whereby they are mainly responsible for the client company’s day to day activities).
▪ A worker has earnings from an employment that have already been subject to PAYE/NICs by a client but they are also engaged by that client as an office-holder. (For example, the salaried Chief Financial Officer of a charity who is also engaged as a director of the charity).
A non-executive director who also provides consultancy services to an organisation will now be brought under IR35 for tax purposes when performing their duties as holder of the office of non-executive director. IR35 will not apply to the consultancy services, however, unless they are provided in circumstances when the worker would be regarded as an employee if they had been engaged directly by the client.
The new rules do not apply:
▪ simply because a worker is a director of their own personal service company.
▪ nor just because their job title refers to them as an ‘officer’ but they do not hold an office.
▪ nor when a company engages another firm as auditor and there is no requirement for an individual’s personal services.
So the same shade of grey has been applied to the IR35 legislation and yet another concept to argue over with HMRC added.