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Know where you stand under IR35

Jonathan Friedman&#39s letter (Money Marketing, July 14) is a welcome

contribution to the IR35 debate. Discussion is urgently needed. The

legislation dates from April 6, 2000. Those taking no action are 16 months

behind the game.

IR35 does not make criminals of UK taxpayers. That is the tax evasion

legislation effective from January 1, 2001. Being caught by IR35 would

usually mean the taxpayer had underpaid tax and NI.

The current version of IR35 addresses business-to-business provision. IFAs

are not employees of clients because providing a public service is not

relevant. Nor is IR35 restricted to those with only one (business) client.

More than one helps in claiming that you are in business, not an employee,

but the Revenue can examine each business relationship to determine which

are in IR35 and which are not.

Problems for financial advisers should only arise from their relationships

with other financial organisations. This includes self-employed advisers

tied to one provider, appointed representatives/IFAs as network members as

well as RIs working for a local IFA.

As regards networks, there is a very simple test, which is whether a truly

independent business would operate in the way an appointed

representative/IFA might be asked to operate under the contract and

practice of some networks. In many cases, the answer would be no.

Problems for RIs are acknowledged even by networks. From our research and

seminars, it is clear that many RIs are de facto employees of IFAs. In

that case, a limited company RI would fall under IR35. Operating as a

self-employed individual with no business structure, IR35 would not apply

but they still have to prove their employment status. If they are de facto

employees, the IFA is responsible for their tax and NI and could also be

seen as their employer.

Advising a small business client is problematic where IR35 could apply.

Too many are still ignorant of their situation. No adviser is expected to

instruct these clients about IR35 or their status but they are required

under conduct of business regulations to know their client.

Advisers should enquire about IR35 as part of their fact-find and satisfy

themselves that they can rely on the information supplied. They should

consider whether their documentation – terms of business, reasons why

letters and fact-find sheets – covers their needs, not only in terms of

giving the best service but also in protecting them against future


Terry Foulkes Director,Taff Associates, Cheshire


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