Legislative Overview
The UK tax system is one of the toughest and most complex in the world and tax solutions are under constant scrutiny. A number of key pieces of legislation have been introduced to challenge the purposes of different tax solutions, namely The Intermediaries Legislation (IR35) and Managed Service Company (MSC) Legislation.
Prior to the introduction of this legislation the use of limited companies as a tax solution, and the drawing of income as a Dividend were seen as a very tax efficient strategy as Dividends do not attract a liability for either Employees or Employers National Insurance.
The Government introduction of the “Intermediaries Legislation” in April 2000, or IR35 as it became known, has brought the effectiveness of a limited company into question.
The aim of IR35 was to eliminate the avoidance of Tax and National Insurance through the use of an “intermediary” where a worker would otherwise be termed an employee for tax purposes.
“Any contractor operating a personal services company, composite company or offshore scheme is attracting our attention.” Gordon Brown, then Chancellor of the Exchequer 2006.
