The contents of July’s IR35 Forum minutes reflect a sincere lack of understanding from HMRC when it comes to the true impact of recent and potential changes to IR35, contractor tax adviser, Qdos Contractor of The Qdos Group has suggested.
Within the now published notes, HMRC failed to offer any clarity over potential reform to IR35 in the private sector:
IR35 Forum notes, ‘Members asked if the recent reforms in the public sector would be extended to 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.’
Seb Maley, chief executive officer of Qdos Contractor said: “The phrase ‘don’t make the same mistake twice’ springs to mind here. HMRC was slow to announce public sector IR35 reform, causing chaos for contractors, recruitment agencies and the public sector itself. If it has plans to extend reform to the private sector – which these minutes hint at – they have a responsibility to end the ambiguity and give contractors and agencies suitable time to prepare.”
The notes also explain that the re-named CEST Tool (Check Employment Status for Tax), previously the ESS Tool, remains in public beta.
IR35 Forum notes, ‘The service is still in public beta, but will be going live shortly. No further changes to CEST are envisaged at this time, but if customer feedback indicates the need to change parts of CEST, HMRC will do so.’
Maley adds that, “According to HMRC, the very tool used to set the employment status of thousands of public sector contractors is still in beta mode and does not have improvements penciled in, is very concerning. Since its release, there have been question marks over the tool’s accuracy.
“IR35 is a complex legislation, easily misunderstood and misinterpreted. It’s a risk in itself to leave potentially career defining decisions around IR35 status to a questionable tool which is constantly being tweaked on-the-fly.”
IR35 forum notes also revealed that HMRC’s tool has been used 450,000 times, reaching a determination 85% of the time.
IR35 Forum notes explain, ‘Check Employment Status for Tax (CEST) has been used c450,000 times and reaches a determination 85 per cent of the time. Where it doesn’t further guidance and the IR35 helpline are available to resolve these more complex cases.’
Seb Maley adds: “It’s a worry in itself that a tool, which by HMRC’s own admission is still being tested, has been used around 450,000 times. The CEST tool apparently provides a determination 85% of the time. What matters however, is the accuracy of each result, and that each case is handled by an unbiased IR35 expert. It would be beneficial for HMRC to disclose how many contractors are now working inside IR35 in the public sector, following the use of the CEST tool.”