The Lords Select Committee on Personal Service Companies has confirmed that end clients will bear no responsibility for IR35 if they are a engaging a personal service company.
There were fears that the opposite would be the outcome as discussions are ongoing and IR35 continues to change. It was believed that if that happened, the use of freelancers would drop as clients would have wanted to avoid any IR35 dealings.
The ambiguity of the future of IR35 has always weighed heavy on freelancers. While some may have been in favour of end clients taking over the IR35 to avoid the extra work themselves, it would have been entirely possible that clients would have been more reluctant to take on contractors or freelancers to save on the paperwork and effort.
For the moment though, IR35 responsibility will not be changing hands with the release of the report. It states that “businesses would generally resist being made responsible for the IR35 assessment, finding the additional administrative pressure and liability as overly burdensome”.
The Government agreed and is not going to make any changes in that respect saying it “currently has no plans to make end client businesses responsible for IR35 where such businesses engage a personal service company.”
The Interim Management Association, who were happy with the report, said: “Interim managers offer their services as genuine self-employed professionals and we fully support the need to penalise those who deliberately avoid tax and National Insurance through the use of intermediaries. We welcome the government’s decision to not make the end-client responsible for determining the IR35 status of PSCs.”
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