If you missed the news last month, HMRC published a 19-page, new IR35 guide to replace the ‘Frequently Asked Questions’ on their website. Split into 6 sections and developed in partnership with the IR35 Forum, the guide is designed to be clearer, more succinct and easier to navigate than the old, now-archived FAQs.
Topics covered in the 6 sections include: 'What is IR35', 'How to work out if IR35 affects you', 'How IR35 applies to you', 'Deemed employment payment', 'IR35 Contracts' and 'HMRC enquiries'.
So what do contractors need to know?
Firstly, the new FAQ’s section is an improvement from before as the old FAQ section had 15 different categories which linked to more FAQs whereas the 6 new sections now have multiple sub-categories and are easier to navigate.
In the ‘How IR35 applies to you’ section, the guide takes account of ‘How IR35 applies to officeholders’ while in the ‘How to work out if IR35 affects you’ section it recommends contractors to use the Business Entity Tests and example scenarios to assess their risk of IR35.
One of the sub-sections is dedicated to HMRC’s Contract Review service, which invites contractors to get in touch with the tax authority if they want help with IR35. This, despite HMRC’s ongoing attempts to get more contractors to use, is in the opinion of experts, a potential way to get into a catch 22 situation as HMRC can use a contractor's information to judge if they are on the inside or out.
The guidance says: ‘If you dispute an opinion from the IR35 Contract Review Service and the dispute can't be resolved quickly, the papers will be passed to the local IR35 Inspector.'
However, this can’t be done without the taxpayer’s full permission and is only intended to clear HMRC’s intent. Based on how HMRC has worded its intent, contractors might assume that by not disputing the ‘outcome’ of the Contract Review Service they might be able to escape enquiry but HMRC has warned that this would have implications too.
The positive side of the CRS guidance is that for the first time HMRC has been able to fully document all the information required of contractors specially the IR35 position of PSCs incorporated or resident outside the UK - this is explained in a way that it hadn’t been before.
Other parts of the guidance like the IR35 inquiry process, expenses, VAT and multiple-person contracts will also give contractors more certainty about the process. Similarly, the ’right to substitution’ clause is addressed in the guidance but in a way which contractors might find unsettling.
Summarising his view on the topic of IR35’s enforcement and HMRC’s new guidance, Alan McCappin, Practice manager at Bradleys Accountants, said, ‘While contractors should welcome any help HMRC provides regarding IR35, the guidance is not likely to answer all your questions and the most cost-effective solution for any contractor would be to seek professional advice.’
If you are a contractor in need of IR35 advice, call our team of experts today on 020 3507 0022.