New Qdos Contractor research indicates that 38% of contractors have been subject to blanket determinations placing them inside IR35 in the public sector. These decisions, made by the engager, result in all contractors working in a particular organisation being made to operate under IR35 without a review of their individual working practices.
Worryingly, these blanket-inside IR35 decisions aren’t confined to only a few organisations, with contractors reporting that many public sector bodies are guilty of this approach. Ironically, 19% of contractors in this data set worked on HMRC projects at the time.
If this isn’t concerning enough, the research suggests that Government departments in total account for at least 38% of these blanket inside-IR35 decisions, with MoD, MoJ, and the Home Office each apparently failing to recognise unique aspects of a contract which IR35 status can hinge on.
The research, carried out to support Qdos Contractor’s IR35 consultation response, suggests that HMRC is exposing its own organisation to non-compliance as it drives towards its goal of netting an estimated £1.2bn a year through reform.
In its attempt to raise tax receipts, HMRC has previously been criticised for chasing the most amount of tax, not the right amount of tax. These statistics simply add more fuel to that fire.
Blanket decisions lack ‘reasonable care’ and, according to the IR35 legislation, are non-compliant. But role-based assessments on the other hand, abide by the rules, as the latest forum notes explain:
“There will be occasions where workers are hired to carry out identical roles, with the same terms and conditions, and where the same determination is therefore correct. This is legitimate and does not amount to a blanket ruling. Treating people in the same factual position in the same way meets the statutory obligation to use reasonable care.”
However, eyebrows have been raised about the fairness of these role-based assessments. A number of IR35 experts have spoken out against them, and Dr Iain Campbell, who heads up The Independent Health Professionals Association (IHPA), is particularly vocal on the issue.
“Role based assessments are always blanketing as it is impossible to assess factors such as the contractor’s financial risks, company structure, working practices, and in particular willingness to be subject to supervision, direction and control, or the myriad of other factors that need to be considered.”
In fact, Qdos Contractor stated in its consultation response, that by definition, role-based decisions cannot ensure accuracy because they set out status before the contract has started and so ignore actual working practices, which hold more weight in an IR35 investigation.
Engagers placing contractors inside IR35 without a fair review of their individual working arrangement can lead to individuals being wrongly taxed as employees. Should companies administer IR35 this way, they risk non-compliance and leave the door open for contractors to claim back incorrect tax payments – incidentally, a trend which is on the rise, as Qdos Contractor highlighted recently.
In response to continued uproar over blanket determinations, public sector engagers (most notably The NHS) are keen to distance themselves from them. Stephen Barclay, Minister of State for the Department of Health and Social Care recently argued he does “not recognise that (NHS) trusts are operating blanket determinations.”
One imagines that NHS locums and contractors, thousands of whom continue to be placed inside IR35 without their own assessment, will disagree with this statement. Certainly, Dr Iain Campbell, does.
“The position is quite the opposite of the line Steve Barclay MP is being fed by civil servants. We are not aware of a single NHS trust that is complying with the legislation and entire professions are being blanketed into forced false employment without reasonable care.”
Another independent worker, who preferred to remain anonymous, explained that Network Rail has taken a similar view to The NHS. He said the organisation, was “clearly not prepared” for reform and now applies a “blanket inside ruling.”
So, is enough being done to ensure – when contractors are working in similar but not the same, roles – that blanket inside-IR35 assessments aren’t simply being passed off as role-based decisions? Nearly four in ten public sector contractors subject to these decisions suggests not.
Ultimately, HMRC is right in the fact that blanket decisions are non-compliant. And yet judging by this research sample – it is the taxman himself (among others) that is breaking the rules.
The evidence of their behaviour suggests they have learned. Learned from the Treasury that government policy – notwithstanding the highest tax burden since 1970 – is to keep on raising more revenue. Raise more revenue:
• To pay for 9000 additional civil servants dedicated to fudging Brexit;
• To finance from Whitehall every funding road currently leading to Brussels;
• To increase NHS funding;
• To postpone the impossibility of squaring the doom circle where an ageing population producing decimated tax revenues also produces elevated demands for health care and social services;
• To distribute 0.7% of GDP in overseas aid;
• To buy replacement nuclear subs and fizzers from America which America would never allow them never to fire;
• To ensure the government, its ministers and servants can continue to exist in the medium levels of comfort which they enjoy;
• To provide many comfortable motor cars for the government and its members.
In one respect I almost feel sorry for the revers. They’re between a rock of insatiable government demand and a contractor hard place of knowledge, mobility and disinclination to pay as much tax as possible. The enlightened accept that a country cannot be run without tax revenues. 20% feels about right to me. I keep four fifths to consume or invest according to my daily whim and I flip the government a fifth to help keep things running along. Sure, it’s tricky but I didn’t ask successive ministers to make ludicrously unsupportable spending commitments in return for votes, and I don’t feel like paying any more to finance them. I didn’t ask successive governments to use NICs to create a giant Ponzi scheme dependent on new mugs coming in. I’d have invested it, much like Norway did with its oil fund and now they have slathers of dough for education, health and social care. I’m exercising the choice which ministers love to remind us through gritted teeth we are lucky to enjoy in this free and fair society. Rule Britannia, hip hip!
The updated ir35 is going tonleave everyone poorer, including HMRC! So basically what’s happening is lots of contract are being advertised as inside ir35, the rates have plummeted, working this out you are talking about 50 to 60% less take home with deductions and then tax and NI on top, due tonthe rate reduction this also means less money over all going to HMRC, so contracts where I was getting between £40 and £45 an hour are big offered at £25 to £30 an hour inside ir35… take in to account not being able to claim your expenses but still having to pay for things, then also include any expense in keeping your company going, web site expense, banking, accountancy, etc. Your even worse off. Not to mention you can nkmlonger out money aside, ie I pay my self a set wage and dividend each month and keep the rest non my company, I pay the corporation tax on it and it sits there for both investment in to new tools and also for rainy days when I have no work etc. I pay tax, NI, etc. when I draw down on it, of course I have already paid corporation tax on this money.
Point and case a friend if mine has accepted that his contract was sweet in to it35, even though it covers everything to be outside, remote working, own hours set, own equipment, no instruction of how to do his job as he knows better than the client/customer… etc but as he said he has no choice. His rate dropped by a good 22%, I am assuming this was to cover the extra outgoings the company would have to pay, on top of that he now pays out NI and tax on the full amount he gets and also now cannot claim any expenses. His expensive software he uses he has to pay for outnof his own pocket. He gets no benefits what so ever, no holiday pay, no sick pay, no pension, nothing and is on 1 weeks notice. He argued with me at the start that the numbers where not that bad but now as the first month is behind us he has realised how much worse he is off. Also die tonthe reduction in pay how much less is being paid to HMRC… why HMRC think that just because you are paid say 100k a year your going to be paid the same for basically permanent work? No your on about 30k a year for the same job.