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IR35 Compliance Passport scheme for contractors to end taxation controversy

Last updated Thursday, September 5, 2013 03:00 ET

Freelancers and contractors threatened by IR35 regulations can now access a free portal to help them comply with HMRC’s rules on self-employment status.

Glasgow, United Kingdom, 09/05/2013 / SubmitMyPR /

~ Compliance Passport designed to protect contractors from falling foul of IR35
~ Represents major step towards self-regulation for contractors and freelancers
~ Developed with one of the big four accountancy firms, leading industry experts and suppliers, with HMRC being kept informed

Freelancers and contractors threatened by the IR35 regulations can now access a free portal designed to help them comply with HMRC’s strict rules on self-employment status.

Offering successful applicants an IR35 Compliance Passport document proving that they are operating safely within the tax authority’s guidelines, IR35Buddy© is a not-for-profit industry initiative created to protect the UK’s more than 1.7 million freelance workers at risk of falling foul of the controversial tax rules. By providing one-man limited companies with a self-regulatory tool, the scheme’s founders hope to end confusion over the regulations - widely seen as a deterrent to one-man businesses and entrepreneurs.

“IR35Buddy has been designed to help genuinely self-employed contractors and freelancers ensure that they fully comply with HMRC’s regulations. In order to restore some clarity to the air of confusion, misunderstanding and lack of knowledge surrounding IR35, we have created a resource that enables contractors to follow the authority’s rules to the letter, establishing their tax status as legitimate one man companies once they have passed the Passport review process,” said Alf Gordon, IR35Buddy’s founder.

“From the onset, our vision has been to work with HMRC, leading IR35 Legal experts, UK service providers and the freelance community to clear up a lot of the confusion surrounding the regulations, eliminating dubious contrived avoidance schemes and ensuring that bona fide contractors are not driven out of the industry by fear or misinformation and that much needed new specialists can enter the market, thus ensuring the retention of the UK’s technical and specialist skills.

“An annual IR35 Compliance Passport, for which there is a small fee, will enable HMRC, contractors, agents and service providers to be assured that the correct tax and NI are being paid to HMRC each year.”

Supported by numerous UK-wide, major service providers, all of whom appear on the site’s many directory and reference pages, IR35Buddy has been launched as a not-for-profit initiative providing freelancers, contractors and one-man limited companies with the resources and advice they need to self-assess their status against the tax authority's test to determine whether they are legitimately self-employed.

Users can complete the assessment online, check their compliance level and access a suite of tools created to help them comply - for free - with a range of HMRC requirements around contracts, company setup, premises and marketing. Following a three stage process of self-assessment, verification and certification, they will receive an IR35 Compliance Passport that confirms an independent assessment of their status while providing them with an insurance expert responsible for dealing with all HMRC enquiries on their behalf - inclusive of tax loss protection options.

As a first step, IR35Buddy provides individuals concerned over whether they stand inside or outside of the controversial regulations with a step-by-step guide to self-assessment against HMRC’s Business Entity Test (BET). A twelve point examination of essential business characteristics ranging from a firm’s contractual arrangements to its advertising activity, the test demands that participants score a minimum of 20 out of 98 points in order to be considered legitimately self-employed.

The second step is an independent contract review by an industry expert to verify that it is IR35 compliant, or, if the terms of their contract mean it would be considered to be inside of the legislation, what amendments or precautions should be taken. The third step is a Passport application and assessment - all completed online with live chat assistance - where a tax passport is issued if accepted or advice provided on how to correct their status if necessary.

IR35Buddy’s suite of educational tools demonstrates how contractors can prove that they are operating as a legitimate business under IR35 criteria, providing access to resources and services enabling them to comply. The suite includes a Substitution Buddy service designed to satisfy requirements around subcontracting arrangements, a Contractual Compliance Buddy and a Premises Buddy providing ultra low cost workspace leases, all available for free via the online hub.

IR35 Buddy has been founded by Oil & Gas Entrepreneur of the Year winner Alf Gordon, who spent the early years of his career as an independent contractor before starting a portfolio of businesses that have turned over £2 Billion over the last two decades including the oil services company Qedi, which was acquired by US firm Amec for £33 million in 2011. Having remained active in the freelance community as founder of many other businesses providing accountancy, finance and insurance, technology and property services to professional contractors, he has launched the free service in response to concerns that IR35 is having an unnecessarily negative impact upon self-employed independents and the industry they serve.
Gordon commented:

“They are rarely acknowledged, but freelance contractors are the backbone of a wide spectrum of sectors from transport and banking to energy, oil and the public sector. They are the unsung entrepreneurs at the heart of the UK economy, and we urgently need to remedy a situation where misinformation and doubt is forcing thousands of them to leave the industry and the UK every year.

“The irony is that IR35 is much misunderstood, and could actually be the contractor’s best friend. Although never originally intended to apply to freelance professionals, it lays out a clear set of guidelines through which contractors can both protect their status and clearly distinguish themselves from unscrupulous tax avoiders”.

“IR35Buddy has been created to cut through the confusion surrounding this legislation and help genuine freelancers contractor to preserve and maintain their standing as legitimate one man companies.”