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Contractor limited companies and IR35 to be investigated by Lords Select Committee

Contractor limited companies are to be investigated by a new House of Lords Select Committee to determine whether personal services companies are being used to avoid tax, and to establish the effectiveness of IR35.

“This inquiry will form a wide-ranging review of the use of personal service companies,” says committee chairman Baroness Noakes.

“During the course of this new inquiry, we will consider the extent to which personal [service] companies are used and the implications for tax, National Insurance and other wider issues, both from the point of view of workers and those who engage them.”

The House of Lords Personal Services Companies Committee is specifically seeking to establish:

  • The extent to which personal service companies are being used to provide services to UK businesses
  • The use of personal service companies in the public sector, and whether individuals providing services to the public sector should be allowed to use them
  • The effectiveness of the IR35 intermediaries legislation
  • Whether there is enough guidance available “to aid individuals in judging the status of business transactions for themselves”, or should HMRC receive further resources for its compliance activities
  • Whether contractors are forced to use limited companies as a condition of securing work, and whether this is appropriate
  • The broader benefits and disadvantages for individuals who use personal service companies.

It would appear that the motivation behind the inquiry is that the Government perceives the use of personal service companies as tax avoidance, particularly as Noakes goes on to say: “In these economically difficult times, it is important that the government receives the tax it should rightfully be receiving, from all those who should be paying it.”

“Equally, we need to ensure that our tax system does not place unreasonable burdens on taxpayers.Of course, this is a complicated topic,” she adds.

Contractors are invited to submit evidence to the committee by Tuesday 31 December 2013, and should be sent by email to milner@parliament.uk.

Published: 21 November 2013

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