Just when you thought significant progress had finally been made over improvements to IR35 administration and were eagerly anticipating the publication of the business entity tests, the PCG and other IR35 Forum members are at loggerheads with HMRC over the scoring system.
The business tests are designed to enable a freelancer to assess their exposure to IR35 enquiry, i.e. high, medium or low and will consist of a number of weighted questions. A positive or negative score will be attributed depending on the answer to a question but it is the scoring system itself that is causing disquiet.
When the IR35 Forum last met we were told that general agreement had been reached over the wording of the tests but Contractor Weekly now understands that the PCG has described the questions as 'insufficient'.
Concerns had already been voiced about the exact scoring of some of the tests during the last two meetings of the Forum and this still remains a thorny issue as the PCG has apparently now warned that it and other Forum members will be unable to support the Business Tests if HMRC do not revise the scoring.
Whilst these recent developments will be frustrating to freelancers it must be remembered that the business entity test is only being rolled out on a trial basis and will be subject to review by the Forum.
The test must ultimately produce a fair and realistic result and if non-HMRC Forum members feel that contractors will be discriminated against then it is right and proper that they flex their muscles to protect the interests of those they represent. You only have to cast your mind back to the Employment Status Indicator to remind yourself how biased the tool was initially until HMRC refined it and made it more reflective of a worker's actual employment status.
My understanding (please correct me if I’m wrong) is that there are no questions relating to how many clients you have. My company has multiple clients and multiple revenue streams and I very much consider myself to be running a ‘proper’ business. I am concerned that the questions will concentrate solely on the one or two large consultancy-based contracts that my company has and everything else will be ignored with regard to the status test.
This was always the problem with this forum fiddling around to assuage the PCG’s bruised ego when they got nothing out of the OTS review.
The responses to this article say it all:
http://www.shout99.com/contractors/showarticle.pl?ft=0;id=73865;n=0
Having done the sample test on the PCG website, I came up as being high risk. I’m currently working on the most IR35 friendly contract I’ve had in 6 years – not sure how the two go together really!!