HMRC has made much of its shiny new business test to gauge the likelihood of limited companies falling under IR35 but, as the old song put it, there may be trouble ahead: the planned test is already coming under attack by members of the IR35 Forum.

Once again, contractors working through umbrella companies will be breathing a sigh of relief that they chose this option. The test, which the Revenue appears determined to press ahead with this month, has come under sharp criticism by several members of the IR35 Forum, notably the PCG.

Responding to the latest minutes of the Forum, the PCG considers the particular questions included in the new business entity test to be ‘insufficient’. The organisation sets out its case clearly on its website, stating:

“PCG have tabled additional tests which would be effective risk indicators and would give genuine businesses greater opportunity to demonstrate their low risk status. For now these have been rejected by HMRC, but PCG will continue to push for their inclusion at a later date.”

Other members of the Forum are in agreement with the PCG that the test is currently formulated in such as way as to categorise many legitimate limited companies as high and medium IR35 risks. Despite the tactful language of the statement above, there is a steely resolve behind the PCG’s diplomacy. It adds: “Unless the Revenue change their stance on the scoring, PCG and other Forum members will not be able to support the Business Tests.”

Watch this space for further developments.

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