Orange & Gold Blog

IR35 tests - what is your risk?

Having had a few days to digest the updated IR35 guidance from HMRC and reviewed the new risk profiling questions I have to say it is good in a few parts only.

The tests are nothing to do with deciding IR35 status and only cover HMRC's risk assessment process so people will simply find out their level of risk of investigation. As such they are pointless. Either you are selected for investigation or you’re not. Once selected for investigation, which has not been widespread in recent years, but may increase going forward, you and your accountant are in the same situation of proving that you are genuinely in business on your own account and not a deemed employee. So no change there.

I would also say that the ‘tests’ are arbitrary and appear to have been compiled by civil servants with no experience of operating in the modern contractor/freelancer market place at all. In one test they give credit for having bad debts and ignore the situation of having multiple clients altogether. A weak effort by HMRC. This sums it up, from page 13 of the guidance document:

"High or medium risk
If you are in either the ‘high risk’ band or the ‘medium risk’ band, there is a risk that we will check whether IR35 applies to you. And this risk is not low."

D’oh!

On a more positive note, if there is anything to take from the guidance it is that the scenarios are interesting to read, as an insight into the HMRC perspective. ‘Barbara’ is well worth understanding as she represents a stereotype that HMRC consider many contractors to fall into. As ever, this is a specialist area of tax law and Orange & Gold’s IR35 experts should be your first step for all questions on this.