Autumn 2006 Newsletter Contents Into The Unknown Season Of Goodwill Farewell Andre Toon Done Doon Day Of Reckoning Artistic Licence Gizmos Again A Free Lunch Sweet As Nectar Security Concerns Going For A Spin The Cap Does Not Fit While It's Hot? Code Cracking Bad Connection Broken Trusts You Can't Take It With You Dividend Returns IR35 RIP? Spam Spam Spam Breaking Up Duty Calls Time Shift Moving Vans

IR35 RIP? The "IR35" rules have been with us now for several years. They generally apply where someone has set up a "personal service company" (PSC) to sell their labour to clients. The rules effectively tax the individual on the company's income as if it was a salary paid directly to them by the client. The law applies if the individual would be an employee of the client if you disregarded the existence of the company. In a recent case on employee rights, an individual worked for his PSC and had a contract with a client through an agency. Originally he had been employed by a predecessor company of the client; he was "converted" into a PSC worker and later transferred to a company which took over his original employer; then the agency was brought into the picture because that was how the new company dealt with PSC workers. When the company decided to dispense with his services, he claimed for unfair dismissal and argued that he was actually employed by the client. The Court of Appeal decided that this was true, even though his contract with the agency ruled out any direct engagement with the end-user. The judges ruled that the way in which the parties all behaved implied that the man was actually employed. This is potentially the end of IR35. It suggests that in the circumstances in which IR35 would apply, it would be unnecessary - the worker would be actually employed by the client. We are still waiting to see what comes of it in other cases, because it would be a radical change. It would also be a big problem for the clients who use PSC workers - under IR35, PAYE and NIC are the worker's problem; if the client is actually employing the worker, the taxes are the client's problem. If you are affected by IR35, you should probably carry on doing what you have been doing, but we will keep an eye on developments in this area.