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Following on from the Budget announcement that the IR35 rules are to be strengthened, HMRC have issued two documents with a view to progressing this objective. On 9 May HMRC published their “Business Entity” tests, available via www.hmrc.gov.uk/ir35/guidance.pdf, which set out various tests to be considered with points awarded for different answers and a resultant categorisation as high, medium or low risk to IR35 exposure. This might be a useful document for those clients who insist IR35 does not apply to them but where
their advisors may be less certain.
On 23 May 2012 a consultation paper was issued entitled “The Taxation of Controlling Persons”. This proposes the introduction of a new type of IR35 scenario for those who have control of significant staff numbers or budgets at the engagers. In such circumstances the engager will be required to account for PAYE and NI as if the individual were an employee even where actual payments are made
to a company or partnership. At this stage this enhanced IR35 regime is not intended to apply to engagers with a turnover or balance sheet assets of less than about £1.7m who employ less than ten people.