After the OTS review of the scheme, there are quite a few changes including:
- Creation of the IR35 Forum
- Complete review and rewrite of HMRC’s IR35 guidance
- New IR35 HMRC compliance approach with 5 specialist HMRC IR35 teams
- Lots more IR35 investigations
- Trial of the Business Entity Tests
- Improved promotion and communication of IR35
- Launch of HMRC’s IR35 contract review service and helpline
- New Assurance processes for IR35 for those in the Public Sector
Much has already been done to improve the administration of IR35 and there is more to do on many of the areas identified for improvement.
The Business Entity Tests will be abolished with effect from April 2015. The tests were designed to indicate the level of risk of an IR35 investigation, rather than being any sort of status test. However, it became clear that the tests were of little use to the typical contractor or Personal Service Company user with most of them falling into the “high risk” band. Worse still it was found that the tests were being manipulated and various web sites sprung up offering to rent virtual offices to contractors and all sorts of additions (at a fee) to gain a “low risk” score. Because the tests are all about the risk of IR35 HMRC investigation, achieving a low risk score does NOT mean that IR35 does not apply. So it’s goodbye to the BETS and not before time.
However, it’ still not all plain sailing and if HMRC wish to conduct an investigation, it is essential that you contact your accountant without delay.