PCG has just published a new edition of its Guide to IR35, the key tax rule that governs whether freelancers are taxed as employees. The new publication comes at a key time following the Dragonfly case in which one freelancer unsuccessfully contested a £99,000 tax bill from HM Revenue and Customs.
John Brazier, managing director of PCG said: “It’s still entirely possible to work outside IR35, despite the shock of the Dragonfly case earlier this year. What that case showed is that the traditional advice remains sound, but must be followed thoroughly and carefully.”
The new edition of the Guide, revised by Abbey Tax Protection, clarifies issues such as the importance of the “upper” (agency-client) contract matching the “lower” (limited company-agency) contract which the freelancer actually signs, and the need to be able to demonstrate through “real arrangements” letters or other documentation that the reality of what happens tallies with what the contract says.
It also emphasises that the “big three” status indicators of personal service (or “substitution”), direction and control and mutuality of obligation remain the key issues.
The new edition of the Guide comes as PCG awaits the outcome of the High Court appeal involving Larkstar Data Ltd. The case was heard in November, and is unusual in that Larkstar’s owner won the case at the General Commissioners, and HMRC appealed to the High Court. PCG is supporting the case; a judgment is expected in the new year.