IR35 Guides - Are you inside or outside IR35?

The first meeting of the new IR35 Forum took place on 6th May 2011. The minutes of this inaugural gathering have been published online.

The Forum was set up following recommendations made by the Office of Tax Simplification, and subsequently announced during Budget 2011 following the decision to keep IR35 in place, but with improved administration.

Attendees of this first meeting included Chris Bryce from the PCG, Kate Cottrell (IR35 specialist), and representatives of APSCo, REC, and the major accountancy bodies.

Some of the more interesting points from the first meeting, the full details of which can be read on the HMRC site, include:

Key points from first IR35 Forum meeting

• The word 'administration' will be construed in the widest sense of the word, when related to how HMRC oversee IR35.


• Attendees expressed their concern over "customer segmentation", e.g. that the current approach does not recognise the difference between 'professional contractors' and 'temporary workers' in the labour market. HMRC agreed to look at how the current segmentation model could be expanded.


• Rather than making random checks as is commonly perceived, HMRC uses risk assessment to decide with IR35 cases to review. Although unwilling to disclose their risk criteria, HMRC agreed that there was a need to be more transparent about the process of identifying potential IR35 targets.


• Improved customer segmentation would also help contractors identify whether they were seen to be low, medium, or high risk of an IR35 investigation.


• Draft guidance should be written to reassure those who are clearly 'outside the ambit' of IR35, that they need not worry about IR35 compliance.


• The move to specialist IR35 teams should improve the likelihood of inconsistency when selecting compliance targets.


• The Forum agreed to look into how to make compliance cases more efficient, to avoid them 'going round in circles'.


• HMRC were asked to show that they have not been targeting certain industry sections, as is the common perception within the contracting industry. However, the Forum agreed the need to improve processes for the future, not concentrate on the past.


• Two action points were identified - to find examples of IR35 cases which have gone on longer than 18 months, and examples of where HMRC have been shown to target specific industry sectors, and regions.


• The Forum will consider creating a 'Gateway Test' to help individuals determine their position under IR35, however there are numerous difficulties in creating one uniform test to suit all parties.


• HMRC addressed concerns over whether use of the currently IR35 helpline would in itself make an individual a target for a formal review. HMRC say that cases were only taken on the basis of risk assessment alone.


• HMRC have agreed to look into the possibility of creating an 'audit trail' for people who use the IR35 helpline to show they have sought HMRC guidance before entering into a contractual arrangement.


• There were some calls for a separate Code of Practice for IR35, but this seems unlikely as factsheets tend to cover a number of tax areas.


• Other parties have contacted HMRC to get involved in the Forum, however it was decided that extending the current number of members wouldn't be the best idea, but other bodies should be encouraged to contribute in some way.

Next IR35 Forum meeting

The next meeting of the IR35 Forum will be on 29th June at 100 Parliament Street. We look forward to reporting further developments shortly afterwards.

All content ©Contract Eye Ltd. Protected by Copyscape. Please scroll down for related articles.