Jonathan Friedman's 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