Contracts that run for over a month will deem a contractor to be employed, and therefore caught under the IR35 regime. Details of the contracting time constraints were released by the Inland Revenue in its final set of guidelines designed to help contractors determine their employment status under the IR35 legislation.
Susie Hughes, a spokeswoman for the Professional Contractor Group (PCG), which represents the interests of over 5,000 contractors said, "In their [the Revenue's] opinion, if a contractor works under a standard agency for more than a month then he is deemed to be employed. This just shows how little that the Government know about the knowledge-based sector and the way that it works, but it will mean that there will be more contractors working directly with the client in the industry."
There are few changes to the initial draft rules which discuss the issues involved in deciding employment status, and examines three hypothetical contracting scenarios. The first examines a contractor working through his own service company, who is affected by IR35, one who is not, and a borderline case (Charlotte).
Overall the PCG were unhappy with the final rules. "These guidelines are disappointing and show that despite the Treasury having no reasonable answer to the PCG's thoughts, they have decided to railroad through this ill-conceived legislation. However the Government has learn to its costs that it cannot dictate market forces but that there will be many casualties on route."
Hughes said that it is difficult to make the IR35 rules right when the principle is wrong in the first place. "The Government has fine words to say about the future of e-business but all this just negates them."