Associated Legislation Framework (Ir 35) Harvard Case Solution & Analysis

Associated Legislation Framework (Ir 35) Case Solution

Evaluation of the associated legislation framework for Personal Service Companies (P SC)

Taxation system contributes to the efficient working of an economy.With the help of well-formulated tax structure and laws, the government would be able to generate revenues from tax, which would serve major projects of the country such as healthcare, education transportation or any other requirement of the state to be fulfilled. The government wants to collect taxes from all the liable sources without any concealment and evasion, which is why they make stringent laws and tax structures that could readily enable them to look into the taxation system efficiently and ensure that all the sectors of the economy are contributing towards paying tax by following the rules and laws imposed on them.Some of the entities are always reluctant to pay taxes, and they avoid following the exact payment mechanism as much as possible(, Griffins, 2017).

Moreover, the government and tax collecting authorities have made several check and balance mechanisms to achieve maximum satisfaction level of collecting taxes,and they always strive to implement such laws and regulations that make the tax implementation and acquisition mechanism more appropriate.

The government aims to collect revenues from those contractors who have their personal companies and who hide or somehow use their business to avoid tax.Moreover, the government does not demote the formulation and execution of service companies. However, its intention is to remove or prevent any possible ill gains that the person might get while providing services through personal companies(Fund, International Monetary ;, 2013).

HM RC should monitor the cases efficiently and should make effective decisions to decide whether the organization comes under the ambit of IR 35 or not. The rules and the changes that have been made over the years in IR 35 laws have made tax evasion difficult. However, the effective implementation of the law could be achieved by ensuring that the laws are not exploiting the rights of innocent contractors.

IR 35 rules only apply to a particular contractor or entity, such as the contractor whops classified as an employee or working directly for the client under the same terms and conditions. The rules clearly and efficiently differentiate and identify the scope of applicability of standards, per contract basis, that whether person is working as an employee or on self-employed basis. Rules are clear and concise, but still, some organizations take advantage of being classified as self-employed and hide significant taxes(Fund, International Monetary;, 2017).

However, there is an exception i.e. if the employee has 5% shares or less in the company of employer, then the rules are not applicable to the income generated by that employee .HM RC considers several aspects while classifying the contract as to whether it would be considered as underemployed or self-employed, such as the control over tasks, who will bear the financial risk, the intention of the parties, the basis of payments to the employee or contractor and many other factors(Griffins, 2016).

The advantages that an individual might get while working in the capacity of a personal service company are enormous;initially, the person would receive dividend from the company regarding salary.Secondly, the range of expenses that an individual service company could claim against taxable profits has a wider scope than what the employee could get against the taxable income.

After analysis and the evaluation conducted regarding public service companies, it can be said that the government is keen to take the maximum advantages from tax revenue by imposing the laws upon eligible individuals and organizations. Similarly, many other milestones have been achieved by the government. Therefore, there are still some loopholes that must be catered to,to implement the efficient legal and corporate system(Limited, 2014).

Critical Analysis and Examples

The government has taken initiatives to manage the balance between the individual workers and those companies that work as contractors for different public sector enterprises.Although the work is same, however, they have different tax liabilities. Hence, this was the motive behind the regulatory legislation by bringing such model of tax that would affect the personal service companies, for example,the personal service companies would eventually be led by the private contractors who provide the workforce to the different public sector companies; this way they are likely to save taxes on the payroll of the employees(U k, Parliament;, 2017).

Associated Legislation Framework (Ir 35) Harvard Case Solution & Analysis


Due to the recent legislation in the UK,the tax regime would affect P SC companies to pay taxes on the salary of the employees. However, the P SC contractors are likely to avoid tax. On the contrary, the government has taken a strong stance over those private contractors that were saving billions of taxes throughout the year.Furthermore, the P S C contractors are tax exempted as compared to those employees whose accounts are tax deductible in some way...........

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