In HMRC

Controversy continues to rumble over the unilateral decision by HMRC to post just six of the original 14 questions agreed by the IR35 Forum. The business tests are designed to help contractors working through limited companies to determine whether they are at high, low or medium risk of being ensnared by the legislation.

By restricting the number of tests and deciding the weighting factors themselves, without consultation with Forum members, HMRC appears to have seen to it that most limited company contractors will find themselves in the medium to high risk categories. One can’t help speculating that this apparent obstinacy (HMRC appears unwilling to yield to advice from Forum members at present) hints at another pressure. Does the Treasury have its mighty hand poised ominously over the Revenue’s nether regions, threatening a nasty squeeze if it fails to haul in the massive £17 billion required by Mr Osborne’s department?

At a time when the Government is ostensibly trying to encourage small businesses to flourish, the reasoning seems perverse: hammering small contractors is unlikely to yield much in the way of additional revenue but could result in many intrepid, one-man-band businesses folding. It would not be surprising to see many who currently run personal service companies turning to umbrella companies as a safer option if the tests go ahead as planned.

As things stand, the tests appear to simply add another layer of ambiguity on top of an already notoriously ambiguous system (so much for improving the administration of IR35). The Revenue still has time to listen to the voices of reason on the IR35 Forum. The question is, with that Treasury hand so near, will it?

Recommended Posts

Leave a Comment