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The PCG also put HMRC on warning that 'unless the Revenue change their stance on the scoring, PCG and other Forum members will not be able to support the Business Tests'.
Nevertheless, as announced in the Budget, the so-called business tests from the IR35 Forum will be published by HMRC this month. The tests are the result of over a year's work by the IR35 Froum - a group of external representatives, including the PCG, and HMRC employees - whose remit is to improve the administration of IR35.
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But just days before the publication of the tests, the PCG has gone public to explain the 'disagreement within the Forum on the scoring of the new 'business entity tests'.
The specific questions have been agreed by the whole Forum, including PCG, but the PCG has now said that it 'believes they are insufficient'. PCG had tabled additional tests which were rejected by HMRC, although the trade group said that it will continue to push for their inclusion at a later date.
Scoring
The actual scoring of the tests has proved a significant divisive issue for the Forum between HMRC and non-HMRC members of the Forum. PCG said that 'along with the vast majority of other external members of the Forum (non HMRC members), PCG are locked in disagreement with the Revenue over the scoring of the tests'.
The accumulated points from the scoring of the tests or questions will determine whether a business is high, medium or low risk.
The PCG said on its website: "If too many businesses are deemed as low risk, HMRC will be concerned that disguised employees are not being captured; if too many fall into the high risk category, the tests will have failed as a mechanism to quickly lift genuine businesses out of the population at risk of investigation.
"For PCG it is imperative an overwhelming majority of businesses taking the tests are categorised as low risk, reflecting real world outcomes. There are many more genuine businesses than there are disguised employees. The tests, if scored appropriately, will offer businesses a quick and simple route out of the quagmire of IR35. However if the tests are scored in such a way that it is difficult for businesses to be placed in the low risk bracket, they will offer no improvement at all. Businesses will remain unsure of their IR35 status and HMRC will have gleaned no meaningful indication of which businesses are most at risk."
The PCG said that it - and most of the other external members of the Forum - are concerned about this issue. An alternative scoring system was tabled by one member of the Forum, but the PCG claimed that despite having widespread support amongst the 'externals' it was been rejected by HMRC.
The PCG appeared to speak on behalf of wider interests within the Forum when it warned the Revenue that: "Unless the Revenue change their stance on the scoring, PCG and other Forum members will not be able to support the Business Tests."
Progress
The PCG did acknowledge that despite the 'all important scoring' issue, HMRC have made some significant strides forwards.
It thought that the adoption of the ‘business entity tests’, showed that a radical shift in approach.
Instead of looking solely at a contract, HMRC is now considering the business entity as a whole. Again, this is an approach towards risk assessment and not a change in the legislative criteria.
HMRC will soon be publishing six hypothetical scenarios designed to provide contractors with greater clarity of their status.
Related stories on Shout99
For general coverage of IR35 policy and cases, see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2012
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