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Doubts raised over proposed IR35 business test
Posted Apr 4, 2012
Concerns over the way IR35 is administered in the future have been raised as members of the IR35 Forum disagree with HMRC over the content and scoring of the proposed IR35 business test.
New IR35 tools planned for April
The latest IR35 Forum meeting minutes, published recently on the HMRC site, record the intention of the Forum's constituent members to publish two new IR35 tools within the next few weeks, to help businesses determine their risk exposure to the Intermediaries Legislation.
The first, an IR35 business test, will enable contractor companies to establish whether they are at a low, medium, or high risk from being investigated. Alongside this test, a set of common IR35 scenarios will be published.
Despite 'consensus' being recorded in the meeting minutes, it now appears that Forum members are far from happy over the questions to be used in a business entity test, and the weighting proportioned to each of the answers.
Disagreement between IR35 Forum members and HMRC
Leading contractor organisation, PCG, responding to the publication of the latest minutes, said it believes that the specific questions in the test are 'insufficient'. The Group has provided HMRC with an additional set of questions which would give genuine businesses a further opportunity to demonstrate their 'low' risk status, but these have been rejected by HMRC.
The way the answers are weighted has also raised concerns amongst IR35 Forum members, who "are locked in disagreement with the Revenue over the scoring of the tests".
Clearly, the scoring of such a test is crucial, as in the PCG's eyes, the tests will only be effective if most companies taking part are deemed to be 'low risk'. One Forum member has even proposed an alternative method of scoring, which was also rejected by HMRC.
Ominously, the contractor group states that "unless the Revenue change their stance on the scoring, PCG and other Forum members will not be able to support the Business Tests."
PCG members invited to take beta IR35 business test
In order to determine how the proposed business entity tests work in practice, PCG members are also being invited to take a simple questionnaire based on HMRC's 12 proposed questions, together with six further questions drafted by PCG.
You can access the test via the PCG home page, but will need to be registered before you can log in.
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