Roger Sinclair (Egos) on New HMRC IR35 guidance

[Hex]

Roger Sinclair of Egos has a page on the New HMRC IR35 guidance here:

egos - new IR35 guidance

Interestingly he is saying that the new guidance provices a way for certain businesses to be able to get some certainty that they're outside IR35, or at least that the Inland Revenue will not investigate them for IR35 (those who come back as low risk).

For anyone coming back as medium risk or high risk they are in the same position as they were before the tests were created - i.e. the contract and working conditions need to be assessed.

This is an interesting take on the test I think.

Here is a quote from his article:

"So, as I read it, what that says is, ‘if we start asking you about IR35, if you can show a score of 20 or more on the Business Entity Tests, then you can tell us to go away; we will accept that, for that reason alone, regardless of the contracts and the reality of your engagements, we will accept that for that reason alone, you are outside IR35; and so we will go away, and will not bother you again for another 3 years.’"

[BlasterBates]

Yes that's my understanding. It's an efficiency drive so they can target more medium/high risk candidates. It does look like the biggest change is that they're intending to do more enquiries, being more systematic by sending standard letters. Whether this will end up in mass enquiries remains to be seen.

In the past even as a high risk candidate the chances are you'd never get investigated. This may change. So perhaps people need to be somewhat more vigilant.

[malvolio]

Hardly a revelation, that's rather the point, isn't it? Identify who not to chase for IR35?

The problem is that the way the tests are currently scored, a BigCo who is self-evidently a business will score low, almost everyone else will score medium or high. So we won't chase the companies we already aren't chasing and will continue to chase the ones we already are. Which kind of defeats the objective.

Also the certainly lasts three years unless your business model changes. So how does that work then? Get a new client, all bets are off?

[BlasterBates]

If you have your own business premises, which gives you 10 points, it strikes me that it would be fairly easy to get the 20 points necessary. A clause in the contract expecting you to do rework and some other minor points would easily see you over the 20 plus mark.

That would mean a simple submission of paperwork would put you in the clear. I wonder how much a rented office space would cost.

[malvolio]

If you have your own business premises, which gives you 10 points, it strikes me that it would be fairly easy to get the 20 points necessary. A clause in the contract expecting you to do rework and some other minor points would easily see you over the 20 plus mark.

That would mean a simple submission of paperwork would put you in the clear.

So you have to spend around £1000 a month plus business rates to have something you don't need to do your job?

Come off it; you'll be suggesting I have to make a loss on my invoices to be considered a business next... oh, hang on...

[Precept]

A commom agenda

It looks like Roger Sinclair has come to the conclusion that there's no point trying to prepare for a possible breach of IR35 when HMRC are unlikely to investigate in the first place.

You only have to look at the report by the Office of Tax Simplification in March 2011entitled Small Business Review to gain the distinct impression that the intention is to find a way to lift the IR35 burden rather than increase it.

The report states inter alia under the section headed Major structural Changes, "Our remit requires the OTS to address the complexities that exist within the IR35 legislation. As indicated above, the structural change of integrating income tax and NICs would take away the need for IR35 but we recommend two options that the Government should consider adopting until the structural changes are introduced:
• Suspend IR35 with the intention of permanent abolition, using the period of suspension to investigate behaviours and costs; or
• Keep IR35 legislation unchanged, but improve the way it is administered by HMRC.
Our third alternative is to consider the introduction of a new “business test”. Although this option is not an immediate simplification (and would require more definitions and tests) it would aim to reduce radically the size of the population potentially caught by the IR35 legislation and thereby remove a large number of contractors from the worry of a potential IR35 enquiry".

If the OTS document is the source of HMRC's Guidelines it is a convincing pointer to the direction in which things are headed and may explain Kate's apparent ambivalence.

HMRC, it has to be remembered are charged with the task of collecting targeted levels of tax income. It is bound to be made more difficult if increasing numbers of Contractors/Freelancers claim expense offsets against their weekly income compared with the practice of incorporated entities who are restricted to one annual offset against corporation tax. And that's beside scores of millions mounting up in VAT arrears as Businesses extend their payment deadlines rather than face Creditor court orders in these chastened trading conditions.

[blacjac]

So you have to spend around £1000 a month plus business rates to have something you don't need to do your job?

Come off it; you'll be suggesting I have to make a loss on my invoices to be considered a business next... oh, hang on...

Last time we rented a serviced office for 2 of us, it cost £280 per month + VAT, and business rates weren't payable (something to do with it being a licence rather than a lease). Admittedly the office had 2 desks, a filing cabinet and a bookcase, with enough room left over so that I had to breathe in if my partner wanted to move her chair back..

Agreed, its still a silly amount of money if all you want it for is to avoid IR35, but to suggest it costs a grand is a bit silly too.

[BlasterBates]

So you have to spend around £1000 a month plus business rates to have something you don't need to do your job?

Come off it; you'll be suggesting I have to make a loss on my invoices to be considered a business next... oh, hang on...

Haven't you checked office space websites? You may be able to do this for £200 a month. I saw some adverts for £200-500. You basically get a desk, from what I could see, which is enough. You could do all your accounts in there, pop in there once a week/month. An unsuccessful IR35 investigation could cause a couple of hundred grand of damage, in comparison £1000 or two would be a prudent investment, and it could be useful anyway having your own office.

The point is if you hand over enough "bumf" to get you off the hook they won't even look at your contract.

[JamJarST]

Haven't you checked office space websites? You may be able to do this for £200 a month. I saw some adverts for £200-500. You basically get a desk, from what I could see, which is enough. You could do all your accounts in there, pop in there once a week/month. An unsuccessful IR35 investigation could cause a couple of hundred grand of damage, in comparison £1000 or two would be a prudent investment, and it could be useful anyway having your own office.

The point is if you hand over enough "bumf" to get you off the hook they won't even look at your contract.

The problem is do, you trust HMRC to keep to their word and not investigate "low risk" cases?

[BlasterBates]

The problem is do, you trust HMRC to keep to their word and not investigate "low risk" cases?

In Lime IT the contractor used her own office from time to time. There's no doubt this is a big plus point even if you do get investigated. I would imagine that it would put them off. That's why it carries 10 points.

I would have thought when you are negotiating with the client doing bits and pieces in your own office for the project should be something to put into your contract. Once you have that you're pretty impregnable.