ARC say IR35 amends too broad

Amendments to the IR35 tax regime include too much room for error, the Association of Recruitment Consultancies has said, and could end up bringing many more freelance contractors within reach of the system.

The trade body has in particular urged the Government to clarify the amendments that bring “office holders” into IR35 – it argues the proposed new rules are “very broad”.

The legislation defines “office” quite loosely, as any position that has an “existence independent of the person” holding it and which “may be filled by successive holders”.

The ARC said the proposals would also be damaging to recruitment companies. “IR35 has commercial implications because remaining outside of it makes assignments more attractive to candidates and helps to keep down the costs to hirers,” it said.

“The solution is to amend the legislation to make sure that ‘office’ is clearly defined, or it would be helpful if [officials] could clarify the aims behind the proposal and its meaning.”

Adrian Marlowe, the chairman of the ARC, said that there was at least some case law that limits the definition of an ‘office’ and thus the number of freelancers and contractors affected. But he warned that on the basis of how the IR35 rules have been interpreted by judges to date, “new judgments could well be different [to case law] once Finance Bill 2013 passes into law”.

The ARC said the Treasury’s own staff had told it that they did not intend to use the new legislation to launch a drive to bring more contractors into the IR35 system. Bit it warned: “The government’s proposal is actually very broad and could result in many contractors being caught by the new legislation - the ARC believes that the proposals are not safe as they currently stand.”