Advertisement 
They emphasised that the policy intention of IR35 is to address situations where intermediaries are used to disguise employment. In order to reduce burdens on businesses which HMRC accepts are not being used to disguise employment, HMRC said that they were proposing to amend their risk rules to consider the overall nature of an intermediary, rather than narrowly at isolated contracts.
Higher risk
A second point to come from the meeting which could be a plus for freelancers is that HMRC explained that they want to focus and increase their compliance activity against those higher risk cases being used to disguise employment. This activity will comprise a range of activities across various sectors.
HMRC also said it will publish its general risk criteria to enable those providing their services via intermediaries to identify whether they are considered high or low risk, but would not publish their entire, detailed risk profile.
As well as increased compliance activity, HMRC said they also wanted to revise and update their internal and external guidance to reflect this changed approach.
These proposals were generally welcomed by the members of the IR35 Forum but the point was made that the proposed published risk criteria may be insufficient for someone to know whether their company was inside or outside IR35.
HMRC said that they believed that published risk indicators, allied to guidance, would enable the majority of those providing their services through intermediaries to judge their level of risk.
On a number of previous occasions, HMRC has stressed that they would not be revealing the details of their risk assessment and they reiterated this position at the latest meeting, saying that some risk parameters would always need to remain confidential otherwise those seeking to disguise employment could manipulate their information in an attempt to present themselves as a bona fide business.
Business tests
Freelancer trade group, the PCG, returned to the subject of business tests, which it had originally supported when the Office of Tax Simplification, and later the Treasury, considered the abolition, retention or amendment of IR35. The outcome of that being to retain IR35 with improved administration, which had in itself led to the creation of the IR35 Forum
The PCG acknowledged that as the Government had decided to retain IR35, any tests to distinguish whether an intermediary was inside or outside IR35 would have to be within the parameters of the legislation.
On that basis, the PCG said they wanted to propose a tiered test approach where the indicators of business dictate the level of HMRC intervention. HMRC asked how they would know about particular test indicators that are not currently captured by HMRC data. The PCG advised that their proposed indicator tests would already be in existence in some sort of data form that could be requested or researched. For example, a business could be asked for documentary proof of the amount spent on training in a given year.
The Forum agreed that the PCG and HMRC proposals appeared to have areas of parity. There was a consensus that when HMRC review an intermediary business they should focus initially on the nature of the business and only if considered a risk should it then consider status case-law indicators. Further work on the 'scenarios' should help to develop this approach.
As part of the general discussion, it was suggested that another indicator HMRC could take into account is whether the business concerned has taken reputable professional advice.
Current proposals are for HMRC to introduce the new risk profiling and processes from April 2012.
Other issues and next steps
During the meeting other issues emerged including:
- Some feedback has been received by HMRC about experiences with their Helpline and HMRC wanted more. PCG said their members did not use the Helpline, so they had no feedback to give.
- HMRC is continuing to meet with other external stakeholders and would like to receive details of anyone else with an interest in the sector.
- Continue analysis if 12 scenarios and the IR35 implications in each
- Despite several requests to the Forum, HMRC reported it had received no details of any current
IR35 cases which are either long-running or otherwise causing concern.
- HMRC to liaise with Department of Business to identify issues of common interest
HMRC share with Forum members the most frequently asked questions the IR35 Helpline has received.
- HMRC published the provisional organisational structure chart.
- A subset of the Forum should meet as soon as practicable to discuss the detail the scenarios in order to establish where there is agreement and where differences of interpretation remain. It was recognised that inevitably there would remain some grey areas.
- A subset of the Forum would meet to discuss the operational processes underpinning the new proposals.
- HMRC would update the Forum before the next meeting on progress against the four specific areas (Helpline, Guidance, Risk and Reviews) previously identified.
- HMRC will research their department’s understanding surrounding taxpayers receiving advice, professional or otherwise.
- HMRC will to set up a technical meeting with their counterpart external Forum members to establish agreement and differences on the indicators that define a business for the purposes of IR35.
- HMRC to take forward the development of their operational approach.
Related stories on Shout99
For general coverage of IR35 policy and cases, see Shout99's News on IR35 section.
--
If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'.
-
Susie Hughes © Shout99 2011
|
