July 6 2012.

HM Revenue & Customs (HMRC) isn't happy that some employees leave an employer only to return offering their services via a limited company - so as to avoid tax. The procedure is already effectively banned through the IR35 rules (term used to denote tax legislation designed to tax 'disguised employment'). HMRC has just published guidance that outlines its risk based approach to assessing compliance with IR35. The aim is to work out if taxpayers are considered high, medium or low risk in terms of IR35.

The risk categories use a points-based methodology to account for risk, control and personal service in the business relationship, as well as HMRC's other tests that cover advertising, premises, 'repair at own risk', billing, substitution, and professional indemnity insurance. Example scenarios are provided. See