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Rolling out the new IR35 regime

Paystream News

Alison Roberts

Friday 15th Jun, 2012

Following our article last month on the amended IR35 regime and introduction of the Business Entity Test, HM Revenue and Customs (HMRC) have now targeted its first set of PSC contractors. HMRC wrote to a number of contractors last week asking the contractor whether he has considered his IR35 status and if working outside IR35, to explain the basis upon which he arrived at this decision.

The content of the letter also includes six IR35 scenarios, new taxpayer guidelines and the Business Entity Test to help the contractor gauge whether he is inside or outside the scope of IR35. This package is for guidance only and is not designed to tell you for sure on which side of IR35 you fall. HMRC also say that the Business Entity Test is voluntary and you would not need to tell HMRC whether you score high, medium or low on the risk banding.

If you do however score in the low risk category, you may wish to tell HMRC since, providing you can evidence your score, the IR35 review will close and HMRC will not carry out another IR35 review on your circumstances for another three years, subject to conditions.

The same goes for if you reply to HMRC and demonstrate that you are genuinely working outside IR35. Again, HMRC will close your case and not review your circumstances for some years.

The letters have been dispatched by three new IR35 compliance teams based in Edinburgh, Manchester and Croydon; each team has 12 members and a status operator. A month has been allowed for the contractor to respond and HMRC advises that it may be necessary to arrange a meeting following a response.

It is advisable that you get IR35 advice on every assignment, and at intervals during assignments. HMRC will not open an IR35 review until after the tax year has ended and if you have not considered your IR35 status at the time of the assignment, you may find it more difficult to remember or gather evidence to support your status.

If you have a received a letter or receive letter in the future and would like guidance and assistance, please contact the Compliance Team on 0161 929 6000 or email Likewise, if you would like to discuss the amended IR35 regime or the content of this article further, please contact us on the same details.
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