Some umbrella company contractors have been getting anxious in case HMRC uses the newly proposed GAAR to hound them.
It was recently revealed that the Chancellor might include a general anti-avoidance rule in the next budget. Contractors have expressed concerns that this could be added to IR35 as a way of policing their employment status. However, a number of experts believe these fears to be unfounded.
CIOT director John Whiting said he did not think contractors needed to be concerned about that a GAAR will have an affect on their employment status unless they have set up an artificial structure.
He went on to say that the March budget is likely to include a GAAR but it is unlikely that this would target contractors working through a company or that it would be used to police employment status.
Paul Mason from Abbey Tax, the IR35 compliance company, said the majority of freelancers and PAYE umbrella contractors working through limited companies would not be affected by a GAAR, unless they work through an offshore-trust arrangement.
The general anti-avoidance was proposed after Graham Aaronson QC conducted an extensive study. The aim of the rule is to deter contrived schemes that use an artificial structure. John Whiting believes that contractors working through a company are highly unlikely to be affected by it. Policing of employment status is already covered by numerous rules including IR35 and MSC, he added.
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