04.03.20

HMRC IR35 Statements

HMRC IR35 StatementsAs the proposed changes to IR35 loom ever closer, there is still an element of ambiguity surrounding many of the practical aspects of the potential changes. HMRC have released a number of IR35 statements and promises regarding these changes. They have detailed how they intend to deal with particular aspects of the changing legislation.

An example of one such IR35 statement is regarding their ‘Check Employment Status for Tax’ (CEST) tool. In their statement they say that HMRC will stand by the result you get from this tool”. This is provided that the information is completed correctly and accurately.

HMRC have stated that they won’t apply the results from any status enquiry obtained after April2020 to any pre-April2020 circumstances. That is unless they suspect fraud or criminal behaviour.

Only time will tell if these promises will be honoured. However, if you have your CEST result, your QDos or Markel Pass, and your IR35 Insurance, then you have done the most you can do to prove your outside IR35 status.

Internal Employment Status Manual

One very interesting document however, is HMRC’s own Internal Employment Status Manual. There have been numerous changes to this in February 2020. One section which is particularly interesting is in the first two paragraphs of the manual per the link below. The question here, on which there does not seem to be any consistent professional agreement, is does this mean HMRC are going to carry out pre April 2020 investigations, but put the onus and potential liabilities onto the employer?

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm0117

The question has to be asked if the end clients and agencies, that are now playing the “inside IR35” card to its contractors, are fully aware of a possible threat from HMRC caused by making blanket policy changes on determining the status of contractors.

Are they also aware of the HMRC guidance from March 2017, Section 7 – regarding the point where ‘the fee payer’ cannot lawfully deduct the secondary NICs from a fee that has been agreed’ but they can if they wish negotiate a lower Day Rate.

Contractors being given an unlawful ‘ blanket’ decision of being automatically deemed Inside are now turning to ACAS after finding that employer taxes are being deducted from their Day Rates.

 

Read more about IR35 at the links below.

IR35 Changes – How to Prepare

Prepare for IR35 reform

Tax Calculations – Limited Company v PAYE/Staff

Contractor vs PAYE Day Rate Calculator

 

As always, if you have any questions regarding the contents of this blog, please feel free to contact us.