Is HMRC sensitive to contractor concerns raised in IR35 consultation survey?
Contractors do not think further IR35 changes are necessary – nor does the vast majority of UK business for that matter. It’s not difficult to see why. Public sector reform has wrongly forced thousands of contractors inside IR35, and all the indications are that private sector changes would be just as poorly implemented.
Independent workers understandably fear IR35 and will never support reform which leaves status decisions in the hands of the engager. Unfortunately, a number of IR35 experts believe the taxman’s mind is made up and private sector changes will be introduced in due course.
While independent workers haven’t given up hope that HMRC will at least delay further reform, they are somewhat realistic about the chance of further changes in time. In a recent Qdos Contractor survey, independent workers outlined a course of action that HMRC must take should it ignore best advice and roll-out private sector changes.
It’s important to point out that these individuals – like Qdos Contractor – do not support potential reform whatsoever.
In their own words, here’s what contractors had to say…
Court-granted IR35 investigations
HMRC has been criticised for its approach in an IR35 enquiry, not least its reasons for investigating a contractor in the first place. These workers believe the taxman should have this freedom restricted.
“HMRC should only be able to extend an investigation with an authority from a court. This will help curb HMRC’s predatory behaviour and avoid long investigations that can destroy a contractor.”
Apply rules only to new contracts
Carrying out IR35 assessments on every contractor working in the private sector would be a huge undertaking. And judging by public sector reform, it’s one which could result in many incorrect status decisions. To lessen the administrative burden and protect those engaged in a contract, individuals would want incoming rules to apply only to new projects.
“No retrospective application to live contracts. Rules apply to new contracts only.”
Gradually introduce IR35 changes
If reform is to be introduced against the wishes of contractors, a number have suggested phasing it in. The contracting community has already urged HMRC to implement any incoming changes in certain industries or upon larger businesses initially, and enforcing reform in stages could minimise overall disruption.
“Changes should be implemented slowly in a phased manner and an independent industry body appointed to assess damage to the economy, individuals and the reduced overall tax take.”
Ensure engager IR35 compliance
Contractors do not feel as though HMRC is doing enough to ensure engagers are abiding by the rules – and the number of blanket-inside IR35 decisions in the public sector makes it hard to disagree. Should private sector changes materialise, contractors have stressed the importance of policing reform effectively.
“Employers should be encouraged to determine employment status on a genuine case-by-case basis rather than applying a blanket status that may not be correct for all workers.”
Fully consult contractors
HMRC insists public sector reform has worked, but has not specifically consulted contractors on the true impact of changes. There was a large overall response to the recent IR35 consultation, but independent workers do not feel they are being given the opportunity to discuss their concerns with HMRC formally. If private sector reform is enforced, contractors’ input is vital to ensuring it is at least manageable.
“Use feedback and consultancy from contractor groups” and “take on board the views of contractors.”
Appoint a trusted IR35 agency
Contractors’ lack of faith in HMRC and the proof that public sector bodies have not coped with reform has led independent workers to call on the Government to enlist the help of an independent agency to ensure engagers administer IR35 in keeping with the rules.
“Appoint a dedicated agency or team to support end clients implementing this – perhaps engage trade sector bodies to represent UK businesses on guidelines.”
Simplify IR35, at long last
Such is the ambiguity of the legislation, that even experienced contractors continue to ask the question: ‘am I caught by IR35?’
If independent workers are unclear (HMRC’s IR35 tribunal record suggests the taxman is too), then what hope do engagers have? Contractors have called for a simplification of the rules which, should private sector reform arrive, would help engagers set IR35 status accurately.
“Very clear rules as to what is inside and outside IR35. No vagueness, so that contractors can be sure they are outside IR35.”
Inside IR35? Offer employment rights
With private sector changes expected, the long-running debate about whether individuals ‘employed for tax purposes’ should receive employment rights has never been more pertinent. This is something contractors expect the Government to address.
“If a determination is made that the contractor is in fact inside of IR35, then they should be entitled to all the benefits of a regular employee. This is key, and the duty of care and burden of proof should lie with the organisation (or the “employer” if deemed inside IR35), NOT with the contractor, who is taking a lot of personal risk.”
HMRC’s IR35 tool does not align with case law, given it assumes that mutuality of obligation (MoO) exists in all working arrangements. Contractors and IR35 specialists are campaigning for a redesign of the tool or the scrapping of the technology altogether.
CEST “needs to be fully revamped” so it can “accurately assess status based on the law and case law, not HMRC’s often wrong opinion. It should be hosted by a body that is completely independent of HMRC so users can trust it.”
With the future of IR35 currently unclear, this set of contractor expectations should make HMRC realise the size of the task that could well lie ahead. It’s now up to the taxman to listen.