The government's IR35 changes became law last week after the Welfare Reform and Pensions Bill received royal assent. Consultations between Customs & Excise and representatives of practitioners and service companies over draft guidance on how the new regime - which will bring more contractors into the PAYE system - is to work, will now take place. Following limited government concessions, some service companies will qualify as self-employed and only be liable to pay national insurance contributions on that basis. They will escape the fate of companies that have to pay both employee and employer NICs because their proprietors will be deemed to be 'employees'. The crackdown on one-person service companies had looked in doubt because of the Lords' rearguard fight over aspects of the Welfare Reform and Pensions Bill. But the rebellion was put down before the end of the parliamentary session last week. Discussions between Customs & Excise and representatives of practitioners and the service companies over draft guidance on how the new regime will work is expected to include the definition of self-employed - which is crucial to the moves to require payment of employer and employee NICs on almost all of assumed fee income. Further ahead is the conclusion of consultations with the Inland Revenue over the tax treatment of these businesses, to clarify what proportion of fees will be regarded as income and how much owner directors can set aside and take as dividends. That will be dealt with through possible clauses in the next Finance Bill.
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