What the third IR35 Forum meeting means for contractors

The IR35 ball is in the Forum member’s court

During the September meeting of the IR35 Forum, HM Revenue & Customs effectively put the IR35 ‘ball’ in the ‘court’ of the external, industry members. It was clear that HMRC had been expecting a lot more input from the members on the key areas of the Helpline, HMRC Guidance, the review process and how to ‘risk-score’ contractor businesses.  I had already submitted a paper on the Guidance and all members are working on further submissions.

Applying IR35, HMRC to try to reach the same conclusion as taxpayers and their advisors

A key development concerns the application of IR35 generally where HMRC come to a different view to taxpayers and/or their advisors. In order to address this, Forum members (not including HMRC) are to meet to try to agree the IR35 status of 12 different scenarios so it can be identified where there is agreement, disagreement and most importantly those in the grey area that causes most uncertainty. HMRC are to provide the scenarios. 

The “service company” question – leaving it blank puts you at risk 

An interesting point concerned the completion of the “service company” question on the tax return. As reported by the OTS most leave the question blank, but HMRC made it clear that the act of not completing the question does feed into their risk profiling process. HMRC can tell from the other entries on the return that the question should have been answered.

Call for views and experiences

HMRC are keen to have names of stakeholders not represented on the Forum so they can meet with them. A need for evidence of ‘real experiences’ of IR35 was expressed by HMRC and, again, Forum members were asked to consult with their respective organisations for evidence and views. I am happy to take to the Forum evidence and views for anyone not represented by the accountancy institutes, the agency bodies, or the FSB, the FCSA or PCG.  This includes details of any IR35 cases that are more than 18 months old.  

What about the FOI request and the tiny number of IR35 investigation cases?

This was not discussed as HMRC are unable to do so until the organisation or individual making the request has been notified.  I expect this will make it onto the agenda for the next meeting.

Lots of work to do now

There is lots of work to do between now and the next meeting. Agreeing the IR35 status of the scenarios with HMRC will be challenging as we have to remember that the law has not changed.  Indeed I suspect that agreeing the actual scenarios could be a challenge in itself! 

Kate Cottrell, of employment status advisory Bauer & Cottrell, is an IR35 Forum member who was seconded by the Office of Tax Simplification for the IR35 review.