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New disguised employment change not a threat to contractors?

The new changes to “disguised employment” IR35 rules – the first ever – pose no danger to honest contractors, according to some contractor accounting experts.

Published early last week alongside other Finance Bill 2013 draft legislation by the Treasury, the new statutory changes will see an extension made to IR35 in order to apply it to office holders even if they use third-party intermediaries, such as personal service companies. According to the Treasury it will be a two-way street, applying to both an intermediary named as a client’s office holder or if a worker is directly named office holder yet receives his or her salary through an intermediary.

In other words, the statutory change is aimed directly towards stamping out the practice of high-level executives, especially in the public sector, from avoiding tax by being paid through a personal service company or some other third party intermediary. These changes were necessary in the eyes of many employment experts, based on the furore over the practice this year,

While the news of a new legislative measure being added to IR35 – already Byzantine in its complexity – could send many freelancers and contractors reaching for their anti-anxiety medication. However, the rest of the disguised employment law remains the same, meaning that genuine, honest contractors that already lie outside the scope of IR35 have nothing to worry about from the new legislative changes, provided they aren’t engaging in the practice now proscribed by the addition to the statute.

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