Contractors' Questions: Can PSCs fight a public client's IR35 decision?

Contractor’s Question: This Contractors’ Questions piece relating to the April regime for IR35 mentions that there will be no appeals process. Is that correct and, if so, what happens if a PSC feels that the decision made about their IR35 status is wrong?

Expert’s Answer: [Editor: After Jan 31, 2017 -- this answer was reviewed and clarified] There is no mention of an appeals process in any of the documents HMRC has published in relation to the IR35 changes. The regime therefore seems designed in such a way that a challenge to an IR35 status decision that the PSC believes is ‘wrong’ can only be made at the end of the tax year.

Interestingly, the draft legislation appears to place a responsibility on the public sector body (often referred to as the client or end-user) to provide a written response about their reasons for reaching the conclusion. However, there is no suggestion that there is any review process at any stage after (or in making) that conclusion.

You should note that the public sector body has responsibility for deciding ‘your’ IR35 status, assuming ‘you’ are operating via a PSC for such a body that meets the definition. The only potential safe harbour, it seems, is from the IR35 digital tool and the result it gives (HMRC has said it will abide by the tool’s result providing details that brought about the result were not fraudulently inputted). Our belief is that that even an assessment of your IR35 status from a private sector specialist who determines your assignment to be outside IR35 may be disregarded, because the public sector body may still insist on using the digital tool.  

The expert was Dan Moss, a director at contractor accountants Orange Genie.

Editor’s NoteThis is the final instalment of a seven-part Contractors’ Questions series based on questions posed in a recent webinar on Autumn Statement 2016 and its impact on contracting. Click to view the previous instalments -- part onepart twopart three, part four part five and part six.

Thursday 26th January 2017