While PAYE umbrella contractors can rest assured that they are beyond the scope of the notorious IR35 legislation, other freelancers working through limited companies will be keeping a keen eye open for any new developments from the recently created IR35 Forum. Moreover, the latest news is that HMRC is about to compose draft guidance on a new “gateway test” model designed to determine whether a contractor’s work is covered by the legislation.
The concept of gateway tests was originally proposed by the Professional Contractors Group (PCG) and was reconsidered at a recent roundtable discussion meeting of the Forum. The latter was set up after the Chancellor decided to retain IR35 in the aftermath of the Office of Tax Simplification’s review of small business taxation. The retention decision was accompanied by a coalition commitment to improve administration of the rules by HMRC and the gateway tests are intended as a step in this direction.
Whilst there are concerns about how such a test will operate in practice, in a press release the Forum announced: “… it would assist taxpayers in gaining certainty about their position under IR35 if a ‘gateway test’ with elements similar to those proposed in the PCG’s submission to the OTS was developed for incorporation into HMRC guidance.”
Comments of the HMRC’s draft guidance for gateway tests are expected at a later date. A good deal of discontent remains in the UK’s freelance community in relation to IR35, perhaps especially amongst contractors working through their own limited companies, who feel they have been unfairly and indiscriminately targeted by HMRC in the past. Whilst some scepticism is likely to persist, practical measures to improve administration of the regulations will be welcomed by many.