|The IR35 Forum, which comprises representative of trade groups, industry and HMRC, has been working on the production of some tests which are aimed at providing freelancers with a guide to their risk factor of an IR35 enquiry. The tests will not, and have never been intended to, give an indication of IR35 status.
Last week, a series of 'leaks' appeared on websites indicating the types of questions and the weighting given to the answers. The unofficial questions included matters like 'Has your business spent over £1,200 in advertising in the past year?'; 'Do you have a business plan?'; and 'In the last two years have you been unable to recover payments worth more than 10 per of your turnover?'
Freelancer trade group, the PCG, has been instrumental in the development of these tests and submitted them to the IR35 Forum, but has subsequently said that it is 'locked in disagreement with the Revenue' and that it and others on the Forum will withdraw their support if the Revenue doesn't change the scoring.
Although the tests and guidance have not yet been made public, the PCG has been trailing a set of 'IR35 Business Entity Tests' among its members and said that it has had a 'superb response'.
The tests were expected in April but now won't be available for at least another week.
Kate Cottrell of freelancer tax specialist Bauer and Cottrell is a member of the IR35 Forum and has been involved since the beginning as an adviser to the Office of Tax Simplification (OTS).
Kate, who is also on Shout99's Ask An Expert panel, told Shout99: "The tests and the all important guidance are due to be published as soon as possible after May 7, 2012. Everyone needs to wait for the accompanying guidance that will be published at the same time rather than speculate on the meaning or the weighting of any particular questions.
"It is regrettable that some party has decided to leak this part of the improved IR35 administration without the guidance and it has clearly caused significant concern for many individuals. These tests were produced by PCG and put to the OTS during the small business review and to the IR35 Forum. HMRC has agreed to incorporate these tests as part of their risk profiling procedures.
"The tests are not IR35 status tests so there is no point in people using them as such. They simply show the level of risk of an IR35 investigation. All individuals running personal service companies are at risk of an IR35 investigation and these tests will simply shows how great or small that risk is.
"As the IR35 legislation has not changed everyone still needs to consider their IR35 status on a contract by contract basis. The tests are a minor part of the new package which should see all sorts of improvements for those affected by IR35 and in particular an end to long drawn out investigations.
"The new system is effectively a pilot over the next 12 months and inevitably this means there will be a lot more IR35 investigations in order to test the new processes. The final wording of the tests and guidance will be HMRC’s so we all need to wait and see the impact, if any, of taking the tests on individuals currently affected by IR35."
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Susie Hughes © Shout99 2012