IR35 reforms 'to be unveiled on May 7'

The taxman’s new processes for contractors to self-assess their exposure to IR35 - in the shape of a business entity test, official guidance and how to apply it alongside IR35 scenarios, will be unveiled on May 7th, or the week commencing, CUK has learnt.

Speaking to an IR35 Forum member yesterday, HM Revenue & Customs said its three-part package to improve IR35 administration would be available on its website from the May bank holiday week, not “later this month” as it hoped in April.

“May 7th 2012 is when I've been told by HMRC that the IR35 business test and the IR35 scenarios – along with the all-important guidance on how each should be used - will go live on its website,” said forum member Kate Cottrell, an ex-Revenue official and IR35 expert.

She declined to be drawn on why the unveiling of the IR35 processes has been delayed; from an initial commencement date of April 6th; to the HMRC official saying “later [that] month,” up to talk this week of April 30th.

Asked about the delay to publishing what are administrative reforms, and to confirm that its new system for IR35 is set to go live to taxpayers on a bank holiday, an HMRC spokeswoman said she expected all the new guidance to be unveiled "in the first two weeks of May."

When it does finally publish the IR35 materials, the Revenue is expected to put the most emphasis on its new guidelines, relating to the test and how to apply it; the scenarios and to the underlying legislation.      

Mrs Cottrell, of IR35 specialists Bauer & Cottrell, explained: “Industry websites hosting parts or all of the test, which may or may not be the final test that HMRC publishes, aren’t helpful and are causing concern for individuals.

“Even if it is [the official test], it needs to be put into context with the proper official guidance to taxpayers - which is critical and which HMRC are bound to make clear from May 7th.” 

The HMRC spokeswoman confirmed: "Customers should await the full HMRC guidance issued by us in May for full and accurate detail."

Still, not all IR35 advisors are investing much stock in the IR35 scenarios, even though they will eventually replace the three IR35 case studies introduced on the Revenue website in 2000. 

“We are not encouraging our contractors to read the scenarios; they will have no force in law and will only seek to alarm contractors, unnecessarily”, said Contractor Essentials, a tax and accountancy advisor to limited companies.  

“We will however be seeking to reassure contractors that nothing of substance has changed, whatever HMRC's opinion may be, it is the tribunals and the courts that decide employment status and they do that on the basis of case law and that hasn't changed.”

Founder Elaine Hazelwood also told CUK that the incoming business test, designed to be able to deem contractors a “high risk” under IR35, smacked of scare tactics from the taxman.

“It reminds me in some ways of IR35’s introduction,” she said, “HMRC’s advice made contractors panic and pay more tax than they were obliged to under the law.”

Other contractor advisors have also expressed concerns about the business test and its 12 questions. Employment status expert Accountax has spoken of an “additional complication to the already complex array of employment status tests”; while IR35 advisory The Law Place warns it will likely give rise to "confusion and dispute."

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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