IR35 forum minutes: changes required?

It has been suggested that the IR35 legislation is not as prominent as it should be in the business world and deficient publicity has resulted in a lack of awareness.

External members of the IR35 Forum, held in August, suggested that as a consequence of inadequate exposure, very few people knew about IR35 or whether or not it applied to them. 

Despite some sectors such as IT being relatively well versed in IR35, it was suggested that other sectors considered IR35 an issue only applicable to those individuals in high pay or high profile top management roles; not to the general 'PSC' populace.  

It was suggested that HMRC's online information on IR35 was of inadequate quality. External forum members agreed that whilst it was of great use for experts, for the majority of the audience seeking clarity the content was unhelpful.

Prompted by this, HMRC agreed that it should cater to everyone by striking a balance between being clear and easy to use whilst incorporating enough detail for those who sought more in depth advice.

An effective way of increasing publicity of the legislation amongst unaware workers therefore seems to be HMRC’s imminent challenge, with hard copies and trade specific journals being early suggestions transpiring from the forum meeting.   

Sole practitioner accountants who don’t necessarily understand IR35 - and where they do are reluctant to advise new clients at the outset that they have a back dated tax liability because of this - are also hurdles for HMRC.

However, efforts to eradicate the latter may be difficult as many still regard IR35 to be a grey area. Consequentially, despite non-compliance with IR35 often having serious implications and incurring intense investigations, they are content to run the risk of not applying the rules and disregarding the matter.

In addition, external members of the IR35 forum revealed discontent concerning the Business Entity Test. They reportedly feel the tests are focusing on the wrong questions and groups.

Concerns were raised that a growing number of end clients in the public sector were asking their workers if they had 'passed' the BET, and often forcing them to be on PAYE or to operate IR35 if they failed.

Despite having no actual data on the frequency the tests were utilised by individuals, or what the pass/fail rate was, HMRC said the BET was being used in a way that wasn’t intended and was having a negative impact.

They said the intention of the test is to provide contractors with an idea of the likelihood they would be faced with an IR35 investigation, but did not denote that, for example, if a contractor’s score was ‘high risk’, they would automatically be 'caught' by IR35.

For more information regarding IR35, visit our IR35 Hub.

The IR35 Forum Minutes can be viewed here.