The scope of IR35 has been extended from April 2013

If you are a director of one company (A) and provide services to another company (company B – and invoice that other company B for those services) AND you are also a director of that other company B, you may well now be caught by IR35 with effect from April 2013.

The key question is whether the services you provide through your own company A “relate to“ your office as director of company B.

To answer whether the services you provide “relate to” your position as director, you need to ask yourself honestly, each time you invoice company B, whether the specific services / tasks / jobs / duties for which you are invoicing and getting paid would have been provided in your capacity as director of company B, if your own company A did not exist. If you can honestly answer “No”, then consultancy work which does not relate to your position as director could still be outside IR35.

If you are a non-executive director of another company (B) but have been using your own personal service company (A) to invoice company B for your non-executive duties, from April 2013 you will definitely have to account for IR35 on all monies received. This is because the recent Budget also extended any test of the hypothetical contract between the engaging company and the individual performing the work to office holders, as well as employees.