IR35 expectations managed ahead of review

Wednesday 15 October 2014

HM Revenue and Customs (HMRC) has been using the IR35 Forum to uncover and manage any expectations that are to be included in the upcoming review of IR35.

These expectations are set to be signed off by forum members, which includes groups that overlook self employed professionals, umbrella company contractors and limited companies, at their next meeting in November or potentially before.

IR35 was unveiled as rules to protect against disguised employment. It ensures that those who are essentially working as employees but through their own companies are made to pay a fair amount of tax. The upcoming review is set to contain a number of recommendations based on workers' experience of IR35 and how it can be improved.

However, a representative from HMRC, Rowena Fletcher, warned that how easy these suggestions will be to implement is dependent on a number of factors. One of these is whether or not the recommendations are aligned with standard general processes at HMRC.

This was stated at the Forum's most recent meeting in July, for which the minutes have only recently been published online.

Ms Fletcher added that in instances where recommendations cannot be implemented, HMRC will explain why.

So far, the contract review service, business entity tests, forum membership and communication of IR35 are already being looked into as part of the IR35 review.

The Forum also recommended two more aspects for review, which covered the administrative burden put in place by IR35 and the service company questions on the Real Time Information End of Year Return. HMRC said it would be looking into these issues with the help of the forum.

HMRC promises that it will look into the recommendations that are put forward but will not necessarily be able to fulfill them.

The tax collector also intends to produce an assessment of the average administrative burden that those affected have to face. It invited external Forum members to offer comment on calculating the administrative burden posed by IR35 and whether or not they think there are other actions that could be taken, other than those already identified by the administrative burdens toolkit. Their responses have already been collected.

Members told HMRC that more guidance is needed where IR35 is concerned. In particular, they said employment status may need more guidance on a topic by topic basis.

HMRC responded by saying it wants to make the Employment Status Indicator tool capable of wider use, including in IR35 cases. It was agreed that this guidance needs to be reviewed and updated regularly and HMRC said suggestions are welcome.

The promotion and communication of IR35 is one area that has been flagged up for review, which the IR35 Forum discussed. So far, 13 recommendations have been put forward and it has been highlighted that HMRC should prioritise what can be done for best value and to capture quick wins.

HMRC stressed that it is important to find the most effective way of promoting IR35, understanding what will provide good value for taxpayers money and to produce the required response.


By Victoria McDonnell

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