Sign Up & Start Today

Latest News

Call Back Request Submit Enquiry

The Market Reaction

IR35 The market reaction was the classic mix of outrage and disbelief and given that HMRC was closing what it saw as a loophole, the reaction from the market was nothing if not expected.
Over the years various representative bodies have gone to great lengths highlighting the conceptual errors and practical problems that IR35 brings with it. Example are given in the next section
As always the market responded, with the usual Contractor Management Companies concocting various models to deal with the 'menace' that is IR35.
Some of business models around:

The problems with IR35

A few of the practical and conceptual problems that IR35 creates are:
  • The law on employment status used to apply IR35 is not up to date with today's working practices.
  • Freelancers subject to IR35 suffer the worst of both worlds. They are classified as employees for tax purposes but have no employment rights
  • There is a feeling of discrimination against the smaller business because of the need to distinguish small intermediary companies from large ones so as to limit the application of IR35 to the intermediaries who are disguising employees.
  • Because of the expenses cap on the IR35 salary calculator, there is an argument that little margin for re-investment is left for the smaller intermediaries as a result of all monies being subjected to PAYE tax.
  • With the deemed salary system there is no distinction between earned and un-earned income as regards taxation unlike with dividends.
There is no doubt that whilst the legislation is not without its conceptual anomalies, it must however be appreciated that the government need the extra Tax Revenue that IR35 and the MSC legislation will be generating it.

IR35 and Atlantic

Atlantic Umbrella has been compliant with IR35 since its inception and has never employed business models that circumvent or ignore it.
We are a PAYE umbrella company and as such we tax earnings at source. This has given our contractors that comfort in knowing that they operate 100% legally.
With the MSC legislation, we believe that our model is still 100% compliant and we will continue business as usual.

Finding the IR35 Rules

The detailed legislation for Income tax can be found in Section 60 of Schedule 12 of the Finance Act 2000.
The detailed legislation for NIC is contained in SI 2000 No 727, which was approved on 13th March 2000 and commenced on 6 April 2000.
In order to be able to introduce these anti-avoidance measures for both tax and NIC purposes, it was necessary to include at the same time, an enabling clause for the NIC's aspects of the measure in the Welfare Reform and Pensions Bill in 1999. This is because NIC's legislation cannot be included in Finance Bills.