Umbrella company contractors are no doubt waiting to find out what the government intends to do about IR35.
The wait will soon be over as HMRC has indicated that it intends to unveil six IR35 scenarios as well as a business test for contractors that operate through their own personal service company. These will help contractors self-assess whether they fall under the rules of IR35.
Members of the IR35 Forum are finalising two new processes for personal service companies and details will be published on the Revenue’s website this month.
The business test, which will be on trial to begin with, asks a series of questions which will be scored based on the answers given. Their total score will help them determine their level of IR35 risk. HMRC has decided to adopt this approach to move IR35 risk assessment away from focusing on individual contracts and instead considering the PSC as a business entity.
The IR35 scenarios are likely to be contractor’s first port of call when they look to self-assess their status. Similar to the case studies the Revenue must on its website back in 2000, these are for guidance only.
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The IR35 Forum actually agreed 14 scenarios with HMRC but the Revenue says it would confuse matters if all of them were published. The Revenue has confirmed that none of the scenarios will be sector specific – two will show cases where a contractor falls inside the rules; two outside; one split and one demonstrates a grey area.
