Latest IR35 Forum Minutes

05th February 2019
Written by Nigel Nordone

Latest IR35 Forum Meeting: Are HMRC really listening?

The purpose of the IR35 Forum is to improve the administration of IR35 overall. Industry experts from accountants and contractor bodies meet with HMRC once a quarter to discuss and consider potential changes to the process and administration of IR35.

Whilst the discussions should be just that, the IR35 Forum minutes for the meeting held on 21st November 2018 suggest that this was not necessarily the case, and that the discussion was a bit more one-sided.

Blanket Rulings

One of the first issues raised was regarding blanket rulings having been adopted by many public sector organisations and the fear is that, when IR35 reform takes effect in April 2020, many organisations in the private sector may also adopt this approach. Whilst HMRC did acknowledge this, they also indicated that in some cases, adopting a blanket decision may not be incorrect:

"An engager may consider that identical facts and terms and conditions apply to other contracts. And it is then not necessary to review every individual engagement separately.”

Effectively therefore, adopting blanket decisions is okay in some circumstances, but this is quite a concerning message for contractors yet to be affected by the IR35 changes. In practice, will end clients be able to determine whether blanket IR35 decisions are being made correctly, and will they be penalised for applying blanket outside IR35 determinations under these circumstances?

Implementation of reform

Of concerns raised regarding the private sector’s capacity to prepare for reform until legislation and guidance was provided, HMRC stated that CEST improvements are underway and draft legislation is expected in the summer.

The consultation on employment status for tax and employment was raised by forum members, however HMRC advised that this is a longer-term issue and that “there is an immediate need to tackle private sector non-compliance with the off-payroll rules which results in substantial costs to the Exchequer.”

For the time being therefore, HMRC are happy to put in place more sticking plasters regardless of the consequences, so long as the income continues to rise.

Forum members also asked whether HMRC would be undertaking a more detailed review into the impact of IR35 reform in the public sector, to which HMRC responded;

“…HMRC expects income tax (through PAYE) and NIC receipts to increase, and CT and dividend receipts to fall. HMRC has seen nothing to suggest their projections were wrong.”

However, if more cases like Susan Winchester’s are brought before a Tax Tribunal, payment of employment rights could become much more common, highlighting the wider issues with employment status, and with severe consequences to the economy. Let’s not forget that in  case, HMRC were one of the respondents who settled out of court. Whilst this was also brought up by forum members, HMRC responded by stating that;

“…as the case was settled out of court before reaching tribunal, it does not set a precedent.”

The notes of this meeting of the IR35 Forum suggests that HMRC are not really listening, and fail to consider the wider picture of the consequences of IR35 reform. The provisional date for the next meeting is 28 February 2019, but if this meeting is anything to go by, there may be little to report other than HMRC paying more lip service and demonstrating exactly how little external stakeholders are able to contribute.

Nigel Nordone
Written by
Nigel Nordone
Nigel Nordone is the Head of Tax at Qdos, after working for HMRC for over 20 years as a tax inspector. We’ve decided to forgive him for this little transgression as his knowledge of how HMRC handle enquiries and compliance checks is really beneficial for both Qdos and our clients. Nigel specialises in employment status and has personally represented hundreds of clients who have been subject to a HMRC IR35/employment status enquiry.

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