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HMRC sending out IR35 letters soon

Contractors working in the personal service company sector are scheduled to receive IR35 scheme letters from HM Revenue & Customers soon, it was recently reported.

PSC contractors – which are more often known as limited company contractors – should actually have received the correspondence this past May. The letters will describe in detail how HMRC has taken a new approach to checking for IR35 in a new ‘risk-based’ manner. The letters will also act as a reminder for contractors to examine IR35 in order to make the determination of whether or not the legislation applies to them, adding that HMRC will contact the contractors further if it feels that applying IR35 to the contractor may be an appropriate response.

Contractors have thirty days to respond to the letter after receiving it. Those who feel that they do not fall under IR35 legislation will need to provide evidence to HMRC supporting their assertion.

The new IR35 guidance put forward by HMRC has been controversial since its unveiling last month. Many contractor experts have taken issue with the new guidance, calling it both overly complex and ultimately useless, considering the actual legislation has not changed at all and that the new guidance simply muddies the waters for contractors already unsure if IR35 applies to them; PCG, one leading contractor body, even went so far as to say that HMRC ended up getting the ball in their own goal by promoting the new guidance so heavily.

Introduced over 10 years ago, IR35 is legislation that was introduced to minimise the impact of tax avoidance by contractors, but has only grown to be a thorn in their side ever since.

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