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After a long period of discussion HMRC have published new guidance regarding self-employed status. They have issued guidelines under the heading – Intermediaries Legislation (IR35): Business entity tests.
The guidance is specifically aimed at those individuals who operate through their own company but the questions raised assume that the engagement status of the worker has to be reviewed to establish if he/she would be an employee assuming that there is no intermediary company. This is in fact the same test that applies to individuals to consider their status of employment or self-employment.
The guidance adopts a risk approach to identifying cases where HMRC would claim that the worker would/would not be an employee and sets out a series of 12 business entity questions, awarding points to the outcomes. In this case points mean prizes as the more points a business scores, the less risk of HMRC regarding the worker as an employee.
The first fact to note is that there has been no change to the law in this area. HMRC are, however, taking a different stance in the matter and their conclusions are written as if they are statements of fact, which they are not. They are not embedded in law and are merely HMRC’s indicators of where they perceive that trouble lies. The points awarded to the answers may be challenged but the fact is that the guidance is the view of HMRC and therefore we must take note of their thinking.
The link to the full document is: http://www.hmrc.gov.uk/ir35/guidance.pdf
If you would like to discuss any aspect of this further please contact our Business Tax Director, John Caithness, in the first instance.
7 June 2012