There has been a certain amount of panic in the contractor community about a statement buried deep in the Budget documents about the reform of IR35. It says:
"The Government is bringing forward a package of measures to tighten up on avoidance through the use of personal service companies and to make the existing IR35 legislation easier to understand. This will include HMRC strengthening specialist compliance teams, simplifying the way IR35 is administered, and consulting on proposals which would require office holders/controlling persons who are integral to the running of an organisation, to have PAYE and NICs deducted at source."
This does not mean that everyone who is an office-holder (ie director or company secretary) of their own personal service company will have to be paid via PAYE. The proposed law change is aimed at the following situation:
A is an office-holder of PLC, such that he personally holds a position on the board of PLC, or has a controlling role within PLC. Instead of being paid a salary by PLC, A has agreed that his own personal service company (L Ltd), will send PLC an invoice for the time he spends on PLC business. PLC may be a large company, or a public department, or a local authority. In this case PLC will have to pay A through its payroll. PLC will not be permitted to pay A through L Ltd.
This change in the law will not affect genuine freelance workers or contractors who do not take up positions on the boards of their customers.