New IR35 Guidance hot off the presses

[malvolio]

Hello Mal

I think the whole test thing was the PCG tests which were presented to the OTS, following PCG's decision to go for tests rather than to get rid off IR35. They were rejected by the OTS and the Chancellor, revamped and put again to the IR35 Forum. If the revamped tests had been accepted in their entirety with the PCG's suggested scoring so that almost all contractors had come out as low risk what difference would this make?

The IR35 legislation has not changed and everyone still has to consider each and every contract. Even if low risk with the evidence to prove it the test will only be worth anything if you are actually investigated under IR35. Consequently we are going to have lots more investigations to test the tests! Some would argue that this makes the whole situation worse.

Hmmm... Perhaps. The gestation of the tests isn't the issue - they were seen as a way to make the application of IR35 better focused in the absence of any better criteria - and I agree that having everyone caught or everyone not caught is totally pointless. The real test is if HMRC revise the scoring over this coming year when they aren't getting the answer they wanted. After all, AIUI the proposal by REC (?) for revising the scoring for the actual tests that would have got a more representative set of answers was similarly ignored.

I think we do actually agree that tests do not and probably never will achieve the stated aim of the exercise. But then if we could formulate better objective criteria to define the boundary, IR35 would cease to be an issue.

And just to be clear, PCG (and its members) remains implacably opposed to IR35 and will continue to press for its removal at the earliest possible opportunity.

[LisaContractorUmbrella]

To quote the guidance document (page 10), after defining the three risk bands, they say:

---

If we think that IR35 may apply to you, we will write to you and ask you whether you have thought about IR35.

If you tell us that you think you are outside IR35, we will ask you for evidence.

The IR35 Forum has helped us to draw up a set of ‘business entity’ tests. These tests will help you to work out which risk band you are in. You will find them in Chapter 4.

If you prove to our satisfaction that you are outside IR35 or in the ‘low risk’ band, then we will close our IR35 review.

---

So given that the tests are not compulsory, and we are not obliged to share the results of the test with HMRC even if we do take it, what will trigger their thinking 'that IR35 will apply to us'?

Also note that the final paragraph says that you have to prove you are in 'low risk' OR that you are outside IR35 - so surely regardless of test result and risk banding, if you have MOO/ROS/Lack of control by client, you should still be able to prove that you're outside - especially with the help of the example scenarios they've provided?

Am I missing something (other than HMRC's tendency to do what they like rather than what they write)?

I don't think that taking the tests will trigger a review. I am the first to admit that this may be cynical but I think that they are far more likely to write to everyone that they know is operating as a single person Ltd company and then go from there - as the document says, the onus is on you to prove that you are outside not on them to prove otherwise. I may even go so far as to say that the tests are a bit of a red herring

[rd409]

How can someone in a sane mid frame, would expect HMRC, PCG or any other party on the forum strive to simplify the IR35 legislation? I mean these people earn their bread and butter due to the threats a contractor is facing. From the very start, unless there is a neutral party which has got no financial benefits from the legislation on the forum, we cannot expect anything resolved.

As Mal & Kate said earlier, they oppose the legislation, but behind the screen they are more than happy by these new changes, as this would mean more business for them.

[scooby]

QDOS Guidance:

IR35 Business Entity Test – Qdos Advice

This week saw the release of HMRC’s new ‘business entity test’ and IR35 scenarios, which are designed to provide guidance to contractors in respect of their level of risk for IR35.

The test is made up of twelve questions, each of which carries a point allocation. Contractors should then total up their points to see which ‘risk category’ they fall in to. 0-10 points represents ‘high risk’, 10-20 ‘medium risk’ and 20+ ‘low risk’.

But what effect will this test actually have?
The test is purely a guidance tool; it’s not going to be used by HMRC and you don’t need to take any action based on your result, even if you are apparently ‘high risk’.

Crucially, IR35 itself has not changed at all and the fundamental factors remain the same. From that perspective, it is business as usual.

However, it is clear that HMRC will significantly increase the policing of IR35 so expect a sharp increase in the number of enquiries in the very near future.

Our advice is to ensure you are as prepared and protected as possible at this stage. Ensure all contracts have been reviewed and you retain copies of such reviews as evidence.

One of the twelve tests is the need for Professional Indemnity Insurance, so it is recommended that you hold such a policy.

If you haven’t already, consider our Tax Liability Cover (TLC35), which insures the legal costs in defending any HMRC enquiry and the tax, interest and penalties if you are caught by IR35.

[tractor]

....

I don't think that taking the tests will trigger a review. I am the first to admit that this may be cynical but I think that they are far more likely to write to everyone that they know is operating as a single person Ltd company and then go from there - as the document says, the onus is on you to prove that you are outside not on them to prove otherwise. I may even go so far as to say that the tests are a bit of a red herring

This is correct. Their intention is to create a mindset where people assume they are in scope and then effectively conning us all into believing it is our responsibility to prove otherwise. In reality as other posters have pointed out, the legislation has not changed one iota and any cases will continue to rely where possible on existing case law. HMRC are simply perpetuating the FUD they started with in 2000.

[JamJarST]

QDOS Guidance:

Their guidance is to buy product from them!!! No surprise their.

[malvolio]

How can someone in a sane mid frame, would expect HMRC, PCG or any other party on the forum strive to simplify the IR35 legislation? I mean these people earn their bread and butter due to the threats a contractor is facing. From the very start, unless there is a neutral party which has got no financial benefits from the legislation on the forum, we cannot expect anything resolved.

As Mal & Kate said earlier, they oppose the legislation, but behind the screen they are more than happy by these new changes, as this would mean more business for them.

I can only repeat that PCG are a not-for-profit trade organisation with the key aim of getting IR35 repealed. They have many other strings to their bow, but making money out of IR35 is absolutely not one of them.

[BlasterBates]

The way I see it, the key difference is not that they've changed anything on the law. The difference is that now everyone will have an enquiry, as they now have standard procedures that can be done at their desk in the office, mainly by correspondence. In the past you could assume that the chances are you'd never be investigated; now you have to assume at the very least you'll get an enquiry. Now the impact of this is dependent on how many can pass the test. If a lot of companies pass the test this releases more resources to focus on the rest. Now the question is, is it best to fill out the test to show you're a medium risk to show you're less of a target than the high risk/refusers. It looks to me like their strategy is to thin out the herd of Gnu's to make it easier to pick off the weaklings.

[Chugnut]

QDOS Guidance:

Just don't get this. If it's only a guidance tool and not going to be used, they may as well have put a recipe for rice pudding up for all it's relevance, no?

It is going to be used and it's clearly how they evaluate if you're within scope or not. Would be interesting to know how Qdos et al would mount a defence if HMRC decide to say "never mind all that MOO stuff, where's your £1200 worth of advertising and proof of random non payments? Haven't you heard? That's the latest criteria. Direction and Control was soooo last week".

[Bumfluff]

The way I see it, the key difference is not that they've changed anything on the law. The difference is that now everyone will have an enquiry, as they now have standard procedures that can be done at their desk in the office, mainly by correspondence. In the past you could assume that the chances are you'd never be investigated; now you have to assume at the very least you'll get an enquiry.

Ditto I thought the same, reading Kate Cot article on this today on CUK front page it was her view that they have already selected people for investigation and people will start getting letters soon. @Kate you know alot about this do you have the list as well ?

Looks like my anal keeping of outside of IR35 and B2B relationship evidence over the years may finally come in useful.

One question I do have more general IR35, if HMRC want to speak to the client but the client is no longer in business or people who worked there moved on etc do HMRC default to the worse case view if I can't prove otherwise because the company / people are not around anymore to confirm my working practices ?