After several weeks of debate and backroom lobbying, HMRC is due to release a “business entities test” to help personal services companies assess their risk of being caught by IR35 rules.
Developed in tandem with the IR35 Forum following the chancellor’s announcement of a major overhaul for the operation of personal services company rules, the business test will be made available shortly after 7 May, Bauer & Cottrell’s Kate Cottrell, who is a member of the IR35 Forum, told Freelanceuk.com in April.
When it appears, the business entities test is likely to be based on six indicative questions. The release of the outline test has been delayed due to the vehemence of discussions within the IR35 Forum. The PCG, which contributed some of the original questions that will be included, believes the current assessment to be “insufficient” and is pushing for the inclusion of more risk indicators.
All the parties involved in the project stress that the test is merely a risk assessment, and should not be used to determine IR35 status, which will continue to be based on the notional contract in place between the contractor and client, revolving around criteria such as control, direction, substitution, mutuality of obligation and so on.
Dave Chaplin of ContractorCalculator.co.uk commented: “The new business entity tests proposed by the IR35 Forum are potentially an unhelpful layer of complexity on top of an already over-complex system.”
The topic has already had an airing in AccountingWEB.co.uk’s IR35 reform discussion group, which features contributions from Kate Cottrell, Dave Chaplin and anti-IR35 campaigner dstickl. If you are interested in more detailed discussion of the reform proposals and business entity test, do join them there.