IR35 shambles is cause to cease reform, says IPSE

Ordinary workers inside organisations cannot be expected to accurately judge IR35 status because not even Her Majesty’s Revenue & Customs can assess it correctly, says IPSE.

The contractor body was not only referring to the MDCM case, where HMRC got status wrong, but also to IR35 reform under which end-user staff are forced to decide IR35.

“HMRC looked at the relevant factors and decided that IR35 should apply,” IPSE said of the case. “The tribunal looked at those same factors and decided that it shouldn’t.

“If HMRC, with all its expertise seemingly cannot make a correct determination, how are public authorities and individual businesses supposed to get it right?”

IPSE’s mention of “individual businesses” relates to a promised consultation looking at extending the reform to the private sector, as currently it is confined to the public sector.

So people inside companies could become the determiners of their PSCs’ IR35 status, exactly as those at public bodies have been since the reform was introduced in April 2017.

But as HMRC found out to its cost in the MDCM case, the IR35 rules are “too complex and difficult to apply with any certainty,” says IPSE deputy director of policy Andy Chamberlain.

He wonders if the IR35 digital tool (CEST) would have found MDCM’s Mark Daniels’ working arrangements ‘inside IR35.’ Or perhaps it did, and that’s why HMRC fought him at appeal.

“If they did, and it came back as ‘employed for taxation purposes’, then this would raise serious questions about the tool’s integrity,” Mr Chamberlain said.

“Criticisms of the CEST tool are accurate... [as] it cannot be relied upon to make correct determinations which is why many organisations feel forced to take a blanket approach”.

This pushing of all off-payroll engagements into IR35 is described by the Association of Independent Professionals and the Self-Employed (IPSE) as ‘unfair.’

But a barrister has implied that it has such serious consequences that it warrants scrutiny by MPs on the Digital, Cultural, Media and Sport select committee.

For now however, the “IR35 shambles shows no sign of abating” -- IPSE said, and if the reform is extended to firms, it warns; “the chaos and uncertainty is only going to intensify.”