IR35 change announced

[northernladuk]

What about as backfill for an SME seconded to work on a project?

Who knows... but if the role is enduring you are filling a permie spot in theory.

[malvolio]

Hands up all those who don't understand the term "P&L" and/or can't distinguish it from a project funding stream...

Figure that out and you'll be some way closer to understanding what an Office Holder is in this context.

[Precept]

Hands up all those who don't understand the term "P&L" and/or can't distinguish it from a project funding stream...

Figure that out and you'll be some way closer to understanding what an Office Holder is in this context.

Are you associating a project funding stream primarily in terms of public sector/non-profit organisations and an Office Holder in a similar connotation?

[malvolio]

Are you associating a project funding stream primarily in terms of public sector/non-profit organisations and an Office Holder in a similar connotation?

No.

HTH

[Precept]

Two HMRC reference documents appear especially relevant to the IR35 amendment concerning Office Holders: ESM2503 - Offices: how an office is created and Offices: definition.

The first one explains how an Office (as in Office Holder) is created, whilst the second provides a description of what an Office is.

It could be argued that both documents appear to restrict the scope of what can be considered an Office. However, the viewpoint contained in a bulletin by Lawspeed the recruitment law specialist takes issue with this benign interpretation - it states:
“ Whilst ‘an office-holder’ would normally be regarded as someone holding a formal position such as a director or company secretary, under the income tax rules it has a far broader meaning. Such a person would certainly be caught but under the meaning in the Act on the face of it so would anyone appointed to any regular position in the client organisation wherever the position is not personal.”
The intention appears to be to broaden the scope of the legislation to catch any contractor who is regarded by HMRC as supplied to a specific position within an organisation. This would seemingly cover any management role unless the role is purely linked to a project being undertaken by the contractor, where the client could appoint a successor. Particularly affected will be interims who by definition generally temporarily fill a specified position, and senior managers in charge of elements of the clients’ workforce or ongoing arrangements.
Marlowe concluded “The new proposed rules are so wide that even contractors who work in non management positions other than for a clear limited purpose would be caught. Far from being a victory for contractors this appears to be a major strike by the government against personal service contractors.”

I think some clarification is needed on this important piece of legislation. An invitation to HMRC to participate in an exercise in clarity would be helpful and perhaps this invitation could be extended to our learned friends in the the law profession who feel they could contribute to a constructive dialogue.

[Wanderer]

This would lead me to think that any post which exists or has existed within the company that is then filled by a contractor will put said contractor automatically inside IR35

I'm sure it would be good for your business if that was true but I think this a far too broad view of what constitutes an office holder.

HMRC discusses the definition of office holder in ESM2503 and many other places.

An office may be created by a charter, statute, or constitution of an organisation or which governs its operation.

The appointment of a succession of individuals to a post or job title is not in itself sufficient to establish an office.

An office is a separate and independent position to which duties are attached; an office does not owe its existence to the incumbent or the discretion of an organisation. For example, the post of manager of a factory or a head of division in an organisation is not an office because such a post will normally only exist as long as the organisation wishes. It will not have the independent existence or endurance required to establish it as an office.

So someone who works as (say) the head of security for an organisation isn't necessarily an "office holder" because the company could abolish the post and merge it with the role of (say) head of operations if the company sees fit.

The few exceptions appear to be offices with a statutory or constitutional responsibility. Obvious examples are the director, trustee or chairman of a company. To my mind, this would also mean that someone like a Data Controller is also an office holder as this is a mandatory role which is required by law.

I can't see this being a problem to the majority of contractors.

[LisaContractorUmbrella]

I'm sure it would be good for your business if that was true but I think this a far too broad view of what constitutes an office holder.

HMRC discusses the definition of office holder in ESM2503 and many other places.

An office may be created by a charter, statute, or constitution of an organisation or which governs its operation.

The appointment of a succession of individuals to a post or job title is not in itself sufficient to establish an office.

An office is a separate and independent position to which duties are attached; an office does not owe its existence to the incumbent or the discretion of an organisation. For example, the post of manager of a factory or a head of division in an organisation is not an office because such a post will normally only exist as long as the organisation wishes. It will not have the independent existence or endurance required to establish it as an office.

So someone who works as (say) the head of security for an organisation isn't necessarily an "office holder" because the company could abolish the post and merge it with the role of (say) head of operations if the company sees fit.

The few exceptions appear to be offices with a statutory or constitutional responsibility. Obvious examples are the director, trustee or chairman of a company. To my mind, this would also mean that someone like a Data Controller is also an office holder as this is a mandatory role which is required by law.

I can't see this being a problem to the majority of contractors.

There are quite a few definitions on the HMR&C website and most of them appear contradictory I was basing my opinion on the judicial definition and the comments from a case which HMR&C had chosen to support that definition. Let's face it we can all speculate but it will be just that until the first test case.

I also think that HMR&C are known for their general all round sneakiness and are likely to use the definition which suits their purposes best i.e. to get as much money as possible out of as many people as possible

[Wanderer]

There are quite a few definitions on the HMR&C website and most of them appear contradictory

Yep, looking at it closer I think that's right enough... Can we all just choose the one we like best.

[saptastic]

Contractors' Questions: Who are 'office holders

According to the Treasury.

"Whilst there is no statutory definition of 'office holder', there is a judicial definition of 'office' that is referred to in HMRC's status manual as a 'permanent, substantive position which had an existence independent from the person who filled it, which went on and was filled in succession by successive holders.'

'Office holder' will have to be defined as to how it applies to the proposed addition to Part 2, Chapter 8 ITEPA 2003. The extension to the current legislation will require not only for the person to be an office holder but also their personal service for IR35 to apply."

[Precept]

Lawspeed again highlight Office-Holders and the role of project status in IR35 issues

For those community members involved with office-holder issues the latest thoughts of Adrian Marlowe of Lawspeed will have significant relevance:
Shout99 : The impact on non-project work of new IR35 rules (referred to in a Shout99 posting) today.

Adrian re-emphasises his view that where the tax law definition of 'office' applies, namely 'any position which exists independently of the person who holds it and may be filled by successive holders’ it is hard to see that a contractor working in any position which may be filled by successive holders could honestly claim to be outside IR35.

He goes on to discuss the importance of establishing the existence of a Project as a an important element in staying outside IR35.

If this signifies a serious attempt by HMRC to strengthen the scope of IR35 it is likely to lead to a rethink about the terms of certain types of contracts.