Has IR35 improved two years on?
Two years ago HMRC announced a new approach to IR35 to improve the administration of the contractors' tax. Qdos' senior tax consultant Andy Vessey looks at how the initiative has evolved.
Rather than reforming IR35, the more limited objective of improving its administration revolved around producing new guidance that included the business entity tests (BETs) and example scenarios.
The IR35 helpline was supposedly improved, offering a three-year "get out of jail" card where a contract is deemed outside of IR35 by HMRC and the arrangements remain largely unaltered when the Revenue select a freelancer for enquiry. Despite HMRC's reassurances that the helpline and review service remain independent of the compliance teams, very few people have been inspired to use it.
Those who have turned to HMRC's review service were probably been forced into doing so by ill-informed public sector organisations seeking reassurances about a contractor’s IR35 status following the Treasury's clampdown on public sector appointees in 2012.
April 2013 saw the IR35 legislation extended to those contractors who were fulfilling office holder roles via their own personal service companies (PSCs), although there appears to have been little activity by HMRC in this area.
Most recently, the House of Lords Select Committee on PSCs conducted its own investigation into IR35 and came up with a list of conclusions and recommendations as to how this awkward piece of legislation could be better administered and policed.
IR35 compliance reviews are now more targeted and driven by new, specialist teams based in Bradford, Croydon, Edinburgh and Salford.
In years gone by, IR35 enquiries usually arose off the back of employer compliance reviews and could take years to conclude. Now, however, as part of HMRC's revised approach IR35 compliance checks are supposed to be more direct. They start with...
Register for free with AccountingWEB.co.uk and log in to see the full article, which examines how IR35 enquiries are conducted and presents a couple of case study scenarios.