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This is the result of over a year's work of the IR35 Forum, a Government initiative to provide a series of round-the-table meetings of HMRC representatives and members of trade and industry bodies to improve the administration of IR35.
Also, taking a step nearer completion is the work of the IR35 Forum on the 'scenarios' - although there are now only six as publishing more was thought to be 'confusing'. Given that there was often disagreement between HMRC and others on whether IR35 was applicable, even when based on the same set of facts, it was agreed to develop a set of scenarios highlighting common areas and differences.
Risk checker - business test
During earlier meetings, HMRC agreed to move its IR35 compliance risk assessment away from considering each individual contract to reviewing the business as a whole. This should be set in the context that there is no change to the actual legislation, just a change in approach to risk assessment by HMRC.
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During the discussion of the IR35 Forum, some members thought that there should be a public consultation or that publishing them should be delayed a year. Some were concerned that the tests should not be published without members being content with them. However, a broad concensus was reached although there were disagreements over the exact scoring of some of the tests and that even passing many of the tests could still leave a business with a medium risk scoring.
It should be recalled that in essence the business test is HMRC’s guidance regarding their compliance risk; it is not a legislative change to IR35.
The tests will be published on HMRC's website in April 2012 on a trial basis, which will be subject to review by the Forum. Shout99 will report on the details of these tests next month.
Scenarios
The 'scenarios' proposal arose because it was accepted that HMRC and external representatives might not reach the same view relating to IR35 status even when presented with the same facts. It was decided that a set of scenarios would be developed and discussed with Forum members to establish the extent of any differences and similarities of opinions.
Of the 17 scenarios reviewed, there was agreement between external members and HMRC on 14 of them, the remaining three scenarios were deemed to be in the 'the grey area'. There was discussion on HMRC’s interpretation of mutuality of obligation, irreducible minimum for there to be mutuality of obligation and supervision.
It was agreed that HMRC would publish six of the scenarios 'as 17 would cause confusion rather then providing clarity'. It was agreed that the published scenarios would consist of two that are caught by IR35, two that are outside of IR35, one grey case where agreement was not reached between HMRC and external representatives and one scenario of a contract that starts outside of IR35 but moves inside IR35 due to a change in practice of the company. It was also agreed that none of the scenarios would be sector specific.
Upper/low level contracts
There was discussion about upper (client>agent) and low level (agent>contractor) contracts. For reasons often cited as 'commercially confidential', the contractor does not always know the details of the upper level contract.
At the recent IR35 Forum meeting, some external representatives said that there should be an education process and code of practice aimed at end clients, employers, employment businesses and accountant/practitioners about IR35. External representatives undertook to put something in place to address this.
This latest information comes from the meetings of the IR35 Forum in February 2012, which had been postponed for a month, and a sub-Committee meeting in March 2012.
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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