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Limited company contractors could fall under Agency Workers Directive if caught by IR35 rules
Posted Nov 10, 2009
A leading contractor accountancy firm has pointed out that limited company contractors who are caught by IR35 could fall within the scope of the Agency Workers Directive.
In October, we reported that small businesses (including limited company contractors) would be excluded from the AWD legislation when it becomes law in late 2011.
However, giant group warns that limited company contractors who are caught by the IR35 rules will not be excluded from the AWD rules, as they would not be seen as 'small businesses' by virtue of their 'employed' status.
Complicated implementation of the AWD
The contractor services provider also suggests that the current proposals are an illogical way to protect 'vulnerable workers', and that agencies and contractors will find the rules complicated to work with, as this example demonstrates:
"For example, an end user could engage six contractors to do the same job at the same rate of pay. Two of them work through umbrella companies, so are caught by the AWD, two work through limited companies but their advisors say they are caught by IR35, so they are also caught by the AWD, while the last two are outside the AWD because their advisors say they are outside IR35.
"It subsequently transpires that one of the limited company contractors who was thought to be outside IR35 is, after new advice, within IR35 and is therefore caught by the AWD Regulations and able to bring a retrospective claim. At the time a limited company contractor is placed, no-one will know if the assignment is outside IR35, and therefore if the AWD applies. As a consequence, compliance with the regulations will be required for all limited company contractors at the time of placement."
Matthew Brown, MD of giant group, commented: "This does not seem a logical way to protect vulnerable workers and for end users of contractors, agencies and contractors themselves this will be in many instances very complicated."
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