The long awaited IR35 guidance was published on Wednesday. The guidance will enable contractors to determine if their contract is disguised employment or if they really are in business in their own right.
HMRC has published a PDF file on its website that tells taxpayers of its new risk-based approach to deciding if people comply with IR35 legislation.
The Revenue explained that it helps people determine whether they are at a high risk of falling under IR35 and what steps you need to take. There are also 6 sample scenarios that demonstrate how IR35 could be applicable to a particular contract.
HMRC has confirmed that this document was drawn up in conjunction with the IR35 Forum.
The guidance also suggests that contractors retain evidence of their working arrangements in case they are subject to an IR35 review at a later date. According to HMRC, if you can prove you are outwith the scope of the legislation, and your circumstances do not change, the Revenue will not look into your working arrangements again for at least three years.
HMRC has also stressed that the Business Entity Tests and the 6 IR35 scenarios are not carved in stone. This is a pilot project and whilst the test and scenarios can help you assess your level of risk, it is impossible to draw up guidance that accounts for every eventuality.
Of course these tests are voluntary; there is no obligation to do them and even if you do and discover that you fall in the high-risk category, you don’t have to inform HMRC. What you may want to do is get advice from an umbrella company.
The Revenue has also set up a helpdesk to deal with enquiries from concerned contractors.
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