HMRC has issued a consultation paper setting out proposals to tighten IR35 compliance by requiring organisations engaging “controlling persons” through personal services companies to deduct income tax and national insurance from fees paid to their companies.
A controlling person will be defined as someone from the contracting organisation who is able to shape the direction of the engaging organisation during the year. “This would be someone who has managerial control over a significant proportion of the organisation’s employees and/or control over a significant proportion of the budget of the organisation,”
This is a response to the 2000 senior civil servants employed through Personal Services Companies and the consultation period ends on 16th August.
It will interesting to see what tests will be applied and whether all income must be paid in this way or if it only applies to part of the income of the consultant? as its planned for 2013 the government may even change their mind as they did with Pastie Tax and Mobile Homes.