The IR35 Forum has revealed that a new business test as well as six risk scenarios will be published in April by HM Revenue & Customs. The improvements have been proposed to make the way IR35 is administered clearer; and from next month contractors and freelancers will be placed into either the low, medium, or high IR35 risk profile.
The advice will be issued to help self-employed workers regarding compliance risk. The aim of the Business Test will be to help contractors understand their position and they can use the evidence after taking the test if they are selected in an IR35 investigation.
The tests are not status tests because the legislation hasn’t been changed since it was introduced in 2000 but the proposals have attracted numerous disagreements due to the fact that industry experts claim that all freelancers cannot be categorised into a one-size fits all method.
The Forum was established by the Government to improve the administration of IR35 and to assist HMRC in identifying specific areas for development. Processes created include the new business entity tests and scenarios as well as a helpline and guidance.
Genuine contractors and consultants will not be affected by the latest changes, but aim to make IR35 easier to understand. And if they do become subject for investigation, their cases should be settled quickly with the help of the test results.
The scenarios which will be disclosed to “reduce the room for interpretation” of whether or not a contractor is in or outside the legislation. It is hoped that the scenarios will clarify the regulation and the IR35 Forum has revealed that it will develop a code of practice to educate contractors and contracting service firms.
The risk setups which will be published by HMRC in April will consist of two with a contractor inside IR35; two with a contractor outside it; a contractor who has started outside IR35 but moved inside; and the grey area of disagreement between HMRC and the Forum.