IR35 ‘office holder’ change – has impact been underestimated?

We read with interest a post by recruitment law specialists, Lawspeed, which suggests that a seemingly minor amendment to the IR35 rules in the forthcoming Finance Act 2013 could cause ‘significant changes’ to be made by the recruitment industry.

Following last year’s Autumn Statement, a new draft clause for inclusion in the Finance Act included ‘office holders’ within the scope of IR35 for the first time.

Many industry experts have indicated that the proposed change should not affect the great majority, although we will have to wait to see if or when any official guidance is released to help determine exactly how IR35 will be applied thereafter.

Notes from a recent Lawspeed seminar, held at on 22nd January, show that several speakers were concerned that Tax Tribunals may interpret the IR35 rules differently if the Finance Act 2013 is passed unamended. The possibility that the way IR35 is applied in future will be greatly extended was also discussed.

The blog notes that “It was agreed, with some alarm, that we could be looking at significant changes to the recruitment industry if the law is passed without amendment.”

We asked Seb Maley, from Qdos Consulting, what his views were on the proposed amendment:

“On the one hand if no guidance is issued as to what an ‘office holder’ looks like and we are left to rely on case law then Lawspeed could be right but that would depend on how HMRC interpreted case law and implemented the legislation.”

“On the other hand HMRC’s own guidance may give a clue that they will perhaps be more discerning.”

The appointment of a succession of individuals to a post or job title is not in itself sufficient to establish an office. An office is a separate and independent position to which duties are attached; an office does not owe its existence to the incumbent or the discretion of an organisation. For example, the post of manager of a factory or a head of division in an organisation is not an office because such a post will normally only exist as long as the organisation wishes. It will not have the independent existence or endurance required to establish it as an office.

Maley continued:

“An office can also be created by custom. But if there is no written authority there must be a long-standing practice or unwritten constitution which makes the existence of the office clear.”

“I really don’t think the change will have any impact on the typical contractor.”

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