HMRC has published the above guidance which details their risk-based approach to checking taxpayer’ compliance with IR35 (the intermediaries legislation). This guidance enables a taxpayer to work out which risk band they are in and advises what actions are necessary as a result of that risk band.

It gives example scenarios to illustrate when and why IR35 will apply to an engagement and when and why it will not. However HMRC stress that this guidance is not a comprehensive guide to IR35.

By way of reminder, the Office of Tax Simplification was tasked with reviewing IR35 legislation with a view to identifying and providing evidence of the complexity and uncertainty created by it, amongst other objectives. Two lead options were put forward in its interim report on small business tax:

1. Either suspend IR35, with the intention of subsequent permanent abolition (subject to the effect on behaviour and fiscal cost); or
2. Keep the legislation unchanged but make explicit commitments to improve the administration.

In Budget 2011 the Government agreed to take forward the latter of these two options and the newly published guidance is part of that commitment. The guidance is available at http://www.hmrc.gov.uk/ir35/guidance.pdf