Minutes from the last IR35 Forum on 9th November have just been published on the HMRC website. They reveal that the Revenue intends to switch its compliance investigating priorities away from IR35 cases it considers low risk to those it believes are at the higher end of the risk scale.
The Forum was originally set up after the March Budget this year and charged with devising better ways of administering IR35 regulations. In addition to representatives from HMRC, it includes experts from a range of industry bodies, including the PCG, the REC and CIOT.
At the latest meeting, HMRC announced that it plans to publish its general risk criteria to help contractors determine whether they fall into low or high risk categories for IR35 review.
Although the proposal was generally welcomed, some concern was expressed that the published criteria may be insufficient for contractors working through limited companies to accurately gauge their risk level. Even so, there was general agreement that the shift of emphasis onto higher risk cases would be good for the contracting industry, even though some cases would inevitably end up at Tribunal.
PCG proposed a ‘tiered test’ strategy, where HMRC intervention would be dictated by clearly spelt-out indicators defining the nature of the business the contractor is involved in. This, the PCG believes, should be carefully evaluated first, before resorting to case law. It was also suggested that when evaluating risk, HMRC should consider whether or not specialist IR35 tax advice had been taken by a contractor.
The new risk profiling approach will start from April 2012 and the date of the next Forum meeting was set for 18th January 2012.