Price and Company
Accountants & Tax Advisers
IR35 has been an established tax problem for several years. The main effect is to force individuals to take 95% (subject to a few deductions) of the income they generate as salary with the knock-on tax and more specifically NIC impact. The combined employees and employers NIC is a massive 23.8% (and increasing!) of salary. These measures prevent service companies from using effective dividend planning. In addition it is no longer possible to share income with a spouse or partner by strategic allocation of shares. They have specifically targeted contractors. Other types of owner managed businesses remain able to use dividend planning. Further information on this is available at the Revenue's web site - see links
PSC's
Personal Service Companies
In early 2000 Personal Service Companies were singled out by the government as a sector that they want to render liable to tax and NIC contributions in a specific manner. This lead to IR35 and the S660A, Arctic Systems case. These measures seek to disadvantage the smaller limited company proprietors. Great care has to be taken when designing remuneration and dividend packages to comply with the rules and ensure that significant penalties are not incurred.
NB. Carefully worded contracts can help but the Revenue will look at the 'facts' as well as the contracts. Forward planning is essential.