IR35 Undergoes Minor Amendments

The Paymaster General, Dawn Primarolo, has again answered questions in the House on IR35. In a Standing Committee Finance Bill debate on the 16th May, she explained the reasons for three minor amendments which will affect service company legislation.

Howard Flight, MP for Arundel, referred to the clause which will make the changes law via the Finance Bill and suggested that the Government used this opportunity to do away with the inequalities created by the IR35 regime:

"The clause somewhat grudgingly corrects some aspects of what was considered to be overkill in the IR35 approach. IR35 targets are given two exemptions that are available to ordinary full-time employees: mileage allowance and partnership expenses. We are pleased to see the provision, which is fair and reasonable, but the amendment would do the correct thing and provide automatic extension of all ordinary employees' tax benefits to IR35 targets. If IR35 individuals are to be treated as though they were employed, they should be covered by the same wider arrangements..."

The amendments which gave rise to this debate are:
 
1. Service company "workers" will get the same relief that conventional employees receive under the new mileage allowance regime for business travel, which came into effect on 6 April 2002.
 
2. Partnership intermediaries who reimburse certain allowable expenses to a partner will be able to claim relief for those expenses in the same way as a service company intermediary.
 
3. Service company intermediaries who cease trading during the course of a year will be able to claim appropriate relief in their final corporation tax accounts for the deemed schedule B payment that they are required to calculate under the service company legislation.

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