HMRC launches new IR35 guidance
HMRC has launched new IR35 intermediaries legislation guidance, following a critical House of Lords review of the law.
The Lords' four-month investigation into IR35 found “considerable hostility” to the regime among contractors. It called on HMRC to do more to show revenue protection provided by the legislation outweighs its cost.
In response, HMRC has published updated guidance, which provides an overview of the legislation, what to do in case of an enquiry and how to work out if IR35 applies.
The Revenue said the publication will make IR35 more ‘user friendly’.
But Seb Maley, operations manager at IR35 experts Qdos Consulting, said HMRC may not satisfy the Lords’ criticism.
“There are some elements of the guidance that will provide extra help and understanding, but there are also a few areas that leave some question marks as to what the Revenue are getting at,” he said.
While Maley added the guidance revamp was a step in the right direction, he said more could be done by HMRC to make the legislation easier for contractors to understand.
Certain elements of the guidance, such as highlighting the Revenue’s free IR35 review scheme, the Contract Review Service, could be a cause for concern, according to Maley.
The service allows contractors unsure of IR35 status to send an application in to get an opinion of whether they are inside or outside of the legislation.
But Maley warned that using this could invite the Revenue to start an enquiry into a client's affairs.
"Accountants should be aware that it would be dangerous if they thought the review service is something clients should take advantage of, as it could potentially put them at risk of being subject to IR35 enquiry.
"If they aren’t experienced enough to handle reviews I would suggest they go to expert rather than the Revenue directly," he said.
Maley continued that while the Revenue says the service is confidential, as it develops it's "clear they will get inspectors involved".
"If you still disagree with the Revenue's opinion, then you can raise an appeal notice. But the only way of doing that is for HMRC to give you an NIC and tax demand, which is fast-forwarding to the end of an enquiry, basically saying that this is what you owe and if you disagree, you can appeal and go to a tax tribunal," he said.
What do you think of HMRC's updated guidance? Does it make it easier for contractors to understand?