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Resurrection of the IR35 Forum

HMRC Release Latest Forum Minutes

Just when we thought that the IR35 Forum was no more, the latest minutes of a meeting held on 17 July 2017, have this week been published. Although the Forum is supposed to be held every quarter, the previous forum meeting took place on 20 September 2016. This absence is likely due to the implementation of the public sector rules which came into force in April.

Use of HMRC’s Online Tool

One of the points HMRC raised and discussed is the supposed success of their Employment Status Tool, or Check Employment Status for Tax (CEST), as it is now referred to. The minutes state that the status tool has been used 450,000 times and that it has provided a determination in 85% of cases. Out of the many determinations provided, one can’t help but wonder how accurate those determinations were, as the decisions were erratic when the tool was first introduced. Very different results could be provided for identical circumstances.

In the 15% of occasions where determinations could not be provided, the minutes indicate that the ‘IR35 Helpline’ could be used for more clarity. The meeting notes talk about how often the helpline has been used over the years, falling to its lowest level in July 2017. It is clear, this is not the first choice for contractors who want clarity over their IR35 status.

Length of IR35 Enquiries

Another issue discussed was the length of time compliance cases can take to settle. HMRC cited that high-risk cases, where there are multiple engagements, would take longer to settle. Our experience of late is that difficult Status Inspectors can often be the reason for particularly lengthy enquiries.

The lack of litigated IR35 cases was commented upon, since the last Tax Tribunal was held in 2011. HMRC responded by confirming that more cases may be litigated in the near future, which is interesting since Qdos will be taking an IR35 enquiry to Tax Tribunal next week.

IR35 Reform in the Private Sector

Rather ominously, when asked about HMRC’s plans to introduce the public sector reform into the private sector, HMRC explained “that the current focus is on embedding the recent reform, and that it was not possible to comment on the plans of the new administration. However, we do of course want to see compliance improve in the private sector.”

It shouldn’t come as any surprise when this does finally happen, but perhaps HMRC should consider taking off their rose -tinted spectacles to fully grasp the consequences of the current and impending reforms to IR35.

Consequences of IR35 Reform

HMRC claimed to have “seen no evidence of significant impact on attrition rates of contractors working in the public sector” despite plenty of anecdotal evidence that HMRC’s own contracting workforce had walked out, as well as other Government departments such as the UK Hydrographic Office. It appears the likelihood of reform to the private sector is growing stronger, with HMRC’s rhetoric suggesting that they view the reforms are a resounding success, and making increasingly non-committal statements about their intentions.

The next IR35 Forum meeting is scheduled for November 2017.

Qdos Contractor is currently offering 20% off their Tax Liability Cover exclusively for Contractor Weekly readers until 20th October 2017 with code “CWTLC2017”, and 15% off all IR35 contract review products until 31st October 2017 with code “REVIEWMYCONTRACT”

By Qdos Contractor

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2 thoughts on “Resurrection of the IR35 Forum”

  1. Ying Tong

    HMRC is a department of the government, whose policies it implements. Doubtless the government would love to raise more revenue through IR35 tightening in the private sector. Whether that additional administrative burden can be imposed on business during Brexit uncertainty by a government without a majority remains to be seen. We are already seeing a banking exodus that might become a stampede.

    Only the most unenlightened of contractors would seek to pay no tax. But it’s debatable whether “the right amount of tax” should be determined by the government alone. Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny. So we should have a say too, more often than once every five years.

    20% seems about right to me. With prudence and moderation it’s perfectly possible to legally and legitimately achieve using personal tax allowances alone. They want to investigate the application of personal tax allowances? Go right ahead, shouldn’t take more than five minutes.

    • Soprano

      20% is at least more reasonable than 30% or 40%… bear in mind, in effect, you pay much more than this through VAT and of course, price inflation… so even 20% is on the high end.

      Hector is the gibment’s collections department, so of course they want this extended to the private sector, to make their job easier. I will be very surprised, though, if this is simply rolled out in this coming April. Very dubious and I think there is a lot of chicken little behaviour going around from what are in effect tea leaf readings. Likelier than not, if the Treasury (which is the relevant party here) does decide to extend, it will first run a consultation and all the usual malarky. However, with the dividend tax at its disposal, I doubt the gibment will see a pressing fiscal need to do so, particularly when the net economic effect could be detrimental; things were different with the public sector, which was to contain bad press, more than anything.

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