As the HMRC ‘improved’ guidance is released regarding legitimacy of personal service companies, many believe that it is not enough to prevent IR35 abuse.
Business advisor Philip Fisher commented on the recent assessment and points out a number of flaws regarding each test drawn out in the HMRC valuation.
The official guidance itself is an attempt to convey how the HMRC will evaluate personal service companies that possibly land within IR35, but Fisher has expressed how the calculations given to each assessment via twelve tests and a calculating points structure may have unforeseen problems.
Fisher states that because of the potential glitches and complications the scoring system of the test has, abuse of IR35 will still be both possible and common.
‘Meeting the 25% Assistance (income from employees) test alone for example, will mean that HMRC regards your company as low risk. However, if you only generate 24% of income from such employees you might automatically be at high risk.’
The worry is that because of the weak structure used by HMRC, and because of the lax guidelines given, until HMRC sets significant resources to attack the sectors affected by IR35 and IR35 advice, the well awaited and well publicised guidelines given are deemed worthless.
What Fisher believes, as do many, is that the HMRC guidance system is nothing more than a scare mongering device, and doesn’t sort the problem that comes with IR35 misuse. With room for manipulation, the system still requires a lot of work and until then companies should remain ‘business as usual.’