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High Street Accountants Struggle With IR35

High street accountants have a limited understanding of contractor legislation according to recent research.

The survey, conducted by Freelance World, focused on twelve individual accountancy firms. The majority of these firms were offering contractors a 'targeted solution' without the knowledge that this is forbidden under the MSC legislation.

The IR35 tax rule, which taxes freelance workers as employees, has been in existence since 1999. Freelance World declared that the accountants they surveyed had a "lack of detailed knowledge" and "worryingly vague knowledge" regarding compliance." One firm in particular said that contractors "didn't need to worry about it" while another said that IR35 had "died a death".

Managing director of Freelance World, Alasdair McGill, commented: "What these firms should be telling their prospective clients is that IR35 compliance should be handled by an employment law specialist…, not telling them that it is nothing to worry about."

He continued, "Accountants should not be issuing advice on IR35 unless they have real experience of employment status and are confident about defending their clients in front of the tax tribunals."

Mr McGill stressed how crucial the right tax advice is for contractors. Failure to comply with the relevant tax legislation could result in future credit problems due to HMRC blacklisting.

A representative from HMRC admitted that advice given to freelancers "sometimes presents a too simplistic picture of whether the Intermediaries legislation applies or not".

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23rd July 2009