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HMRC’s IR35 Review to be published imminently, contractors learn from the IR35 Forum

Contractors should finally get to see HMRC’s long-awaited, and long overdue, IR35 Review, as it is due to be published imminently.

This is according to the minutes of July’s IR35 Forum, which also show that the debate over the Business Entity Tests (BETs) has intensified, and the tests might be a step closer to being abolished.

Contractors will also be provided with regular IR35 statistics from April 2015, as HMRC has announced it intends to publish data on the number of cases, tax yields and even the responses to the service company question in the RTI end of year return.

Previously, HMRC has only released this data in response to Freedom of Information Act (FOI) requests.

“HMRC’s IR35 Review is long overdue but timely following the pressure by forum members to abolish the BETs,” notes ContractorCalculator CEO Dave Chaplin.

“Given that HMRC’s framework to better administer IR35 was introduced in May 2012 that means HMRC should have over two years worth of data. This should enable the taxman to draw some firm conclusions about the ‘new’ framework’s effectiveness.”

The forum subcommittee reviewing the BETs has concluded that the “BETs are not generally known about or used”. Furthermore, clients in the public sector continue to misuse the tests, and according to forum member Kate Cottrell are placing “impracticable demands” on contractors to comply.

“That the minutes show HMRC’s forum members are talking about how to manage the BETs’ withdrawal demonstrates just how far down the road they are towards abolishing the tests,” continues Chaplin.

The minutes go on to say: “Forum Members agreed that if the BETs are withdrawn, the Forum will continue to work together to provide greater clarity as to when IR35 is likely to apply although it was recognised that a further iteration of the Business Entity Tests would not be helpful.”

This is positive news for contractors as yet another set of tests sitting on top of the existing IR35 legislation and guidance only confuses the situation, as the BETs have done.

Chaplin continues: “Securing a commitment from HMRC to regularly publish IR35 performance data is a huge step in the right direction. As is the acknowledgement that existing measures such as the BETs are not effective and should be reviewed with a view to changing or abolishing them.”

He concludes: “Having regular access to performance data means that we will be able to properly evaluate the effectiveness of existing and new compliance activity, and can press for ineffective measures that waste contractors’ time to be removed.”

Published: 08 October 2014

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