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Workers could be victimised by IR35 due to ignorance

It’s unfortunate, but many workers may run the risk of being victimised by IR35 rules because they were ignorant of the consequences of incorporating.

The Low Incomes Tax Reform Group says that many contractors are being told by quite a few end-users that the only way these freelancers will obtain work is to become a limited company. However, these same end-users now stand accused of not furnishing these erstwhile contractors with the consequences of working in this manner, particularly the tax implications of such a change, said the campaign group.

Firms are most likely pushing their contractors to change to personal service companies in an effort to reduce their tax liabilities in the still sluggish economy, the group believes, and has called for those abusing system loopholes to be investigated by Her Majesty’s Revenue and Customs. Group chairman, Anthony Thomas, warned that workers are caught between a rock and a hard place, as if they end up being coerced into working upon terms that allow their employers to reduce their tax burden they risk challenge by the taxman, yet refusing to work could lead these contractors to be refused benefits as a result.

The true problem is that workers are not being given the requisite information to make an informed decision, Mr Thomas added. Without being given the costs and implications inherent in the decision to become a limited company, the group chairman believes that too many workers are walking into the situation blind and possibly exposing them to tax liabilities.

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