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IR35 Forum: HMRC outlines four areas that could offer real IR35 process improvements

Contractors may be seeing some real progress from the IR35 Forum, after HMRC laid out four key areas in which it promises to make improvements to IR35 processes.

HMRC is seeking “specific detailed comments on how to make improvements” to its IR35 helpline, contractor guidance, status review and investigation processes. It also wants to improve how it assesses the risk of contractors being caught by the legislation.

Non-HMRC members of the Forum have been asked to consult members and colleagues about these ‘framework areas’, because HMRC is “concerned that there was a risk that not enough detailed, specific information was being provided about areas where it was perceived HMRC needed to improve its administration of IR35.”

This is according to the minutes of the latest IR35 Forum meeting, held on 14 September 2011, at which HMRC confirmed that it “would share its broad risk assessment with the Forum, but would not share detailed risk profiling.” Whether contractors and their advisers and agents can use this ‘broad risk assessment’ to establish IR35 status, and therefore tax certainty, will depend on the level of detail HMRC provides, but this small concession by HMRC may be a positive step.

Another sign of progress was the publication of HMRC’s draft IR35 Operational Strategy proposals, intended for discussion by IR35 Forum members and wider stakeholders. This suggests direct intervention by IR35 compliance teams using IR35 risk analysis.

To assist with clarifying ‘grey areas’, HMRC plans to create 12 varying contractor scenarios based on real cases “in order to identify where there is agreement with HMRC, where there is disagreement with HMRC, and where there is uncertainty.” Non-HMRC Forum representatives will present their views on the scenarios at the next meeting.

In addition, indirect intervention would be implemented via the IR35 Helpline, an IR35 National Compliance Unit and a Business Educational Support Unit, which will provide contractor and client education and publicise IR35 guidance through a variety of channels.

And, for the first time, the minutes of this latest meeting read like there was a genuine debate between HMRC and non-HMRC members, rather than reading like an inspector’s summary of an investigation. The change of reporting style appears to be down to a Forum member’s request " that minutes reflect where there is disagreement rather than, as previously, imply that there is always unanimity.”

The next meeting will be held on 9 November 2011. It is hoped that at that meeting information begins to emerge on specific improvements HMRC may adopt to better administer IR35.

Published: 06 October 2011

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