It has become evident, especially since the budget that the Government will try and clamp down on what they consider to be 'disguised employment'. The first step will see HMRC launch a new set of processes that they say will serve to help contractors and other business organisations asses their own risk as to being caught up in the IR35 legislation. The new IR35 business test has been produced by the IR35 Forum, a group comprising HMRC officials and business experts but it is important to note that the test is purely advisory and no changes have yet been made to the actual legislation that underpins IR35.
Part of the test appears to have been leaked on various business and contractor forums but we are due to get the all important guidance published on bank holiday Monday - May 7th. Here are a few of the questions that are expected to form the business test together with the proposed weighting to be assigned to each answer:
PII - Are you required to have professional indemnity insurance cover (Yes = 2 points)
Personal Service - Does your business have a right to send in a substitute if you are unable to work? (Yes = 2 points)
Substitution - Has your business actually used a substitute within the last 24 months or hires a sub-contractor to perform your contracted work? (Yes = 20 points)
Business Premises - Do you own or rent a property purely for business reasons? (Yes = 10 points)
Repair at Own Expense - Would your business have to pay for rectifying any mistake made at work? (Yes = 4 points)
High Risk = between 0 and 10 points
Medium Risk = between 10 and 20 points
Low Risk = over 20 points
These ratings have already caused friction in the business groups within the IR35 forum and HMRC. If it materialises that the score above do form part of the published test then many professional contractors will be deemed to be at a high risk of an IR35 investigation.
We will publish an update once the official test goes live.