Following the announcement in this year's Budget that an IR35 Forum was to be established with a view to advising on improvements to IR35 administration and monitoring progress, the group held its first meeting last month.
The Forum is made up of six representatives from HMRC and eight persons from representative bodies and organisations.
Following the announcement in this year's Budget that an IR35 Forum was to be established with a view to advising on improvements to IR35 administration and monitoring progress, the group held its first meeting last month.
The Forum is made up of six representatives from HMRC and eight persons from representative bodies and organisations. Their agreed mandate is to advise on the improvements in the administration of IR35 and in a transparent manner to assist HMRC in:
- identifying specific areas for improvement in the administration of IR35;
- developing an overarching strategy for dealing with the administration of IR35;
- designing specific approaches and steps within the overarching strategy;
- identifying and agreeing measures of success against which to judge improvements;
- monitoring the implementation of the new strategy and progress against agreed measures of success; and
- reporting on progress in implementing improvements to the administration of IR35.
Enquiry selection
HMRC refuted suggestions that there was inconsistency in their risk assessment and case selection procedures across the country. The department said that all IR35 reviews were carried out on a risk assessment basis and if this suggested that IR35 may apply, then the case was referred to specialist teams. The Revenue, however, accepted that the move towards using specialist teams to conduct IR35 reviews would reduce the instances of any inconsistency.
Although HMRC cannot reveal its risk criteria in detail, the department did accept that greater transparency would give contractor's reassurance and allay fears that they may be randomly selected for an IR35 enquiry.
Industry focus
HMRC believes that the implementation of a “Customer Segmentation” model is the way forward in improving the administration of IR35. This would allow taxpayers to self-assess their IR35 exposure by referring to HMRC published targeted guidance that is relevant to the sector they work in. Freelancers would then be able to decide whether the Revenue would regard them as low, medium or high risk.
Surely we all know by now which industries/professional sectors use contractors more prevalently, e.g I.T, oil and gas, engineering (aerospace etc), finance, management consultancy etc. If therefore the purpose of 'segmentation' is to recognise that there are certain characteristics that are unique to working within a particular sector and making an allowance for these in the risk self-assessment, then this is to be welcomed. How long will it take however to produce targeted guidance for each sector? Depending on how many 'segments' the Forum believe are potentially affected by IR35 we could be waiting some time yet for the publishing of such guidance.
Gateway Test
It was suggested that a tool similar to HMRC's Employment Status Indicator would be very useful, although one of the difficulties in relying on the results of such would be contractor-agency and agency-end client contracts not mirroring each other. Nevertheless HMRC have been tasked with drafting guidance and outline a 'gateway test' model for comments.
Helpline and contract review service
HMRC attempted to play down concerns that by contacting their helpline would result in the enquirer being subject to an IR35 enquiry, by explaining that two experienced officers operated a very strict policy of not referring any taxpayer enquiries to investigating colleagues.
The Revenue agreed to explore the possibility of recording calls and providing taxpayers with a reference number that would prove they had sought HRMC assistance before entering into contracts.
The next meeting is scheduled for 29th June.
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