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HMRC has a rethink on IR35

HMRC has a rethink on IR35

Umbrella company contractors might be interested to learn that HMRC is considering changing the way it thinks about IR35.

The Revenue admits that a lot of people do not understand if they fall under IR35 if they work through a personal service company on a contract-by-contract basis.

IR35 is designed to stop people using an intermediary as a way to disguise employment. HMRC now proposes to take the overall nature of the intermediary into consideration, rather than investigating isolated contracts as it does at present.

HMRC also wants to focus on those cases that it deems higher risk and to help contractors identify whether they class as low or high risk, the Revenue will publish the general criteria it uses to classify risk.

These latest proposals were well received by the IR35 Forum members, but it was pointed out that the general risk criteria may still not be enough to let a contractor know if he or she came under IR35.

The PCG has supported the idea of business tests to determine the status of an intermediary. The Group has now taken that idea one step further and suggested a tiered test approach based on business indicators, whereby the indicators would dictate whether the intermediary warranted further investigation. Suggested indicators could be how much a business spends on training and whether it has taken professional advice from a reputable company.

The Revenue is also calling for more feedback from users of the IR35 Helpline in order to evaluate its success.

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