'Blanket' IR35 decisions win taxman's tentative approval

A previously guarded backing from HMRC of blanket IR35 decisions has been significantly firmed up by the tax authority at the latest IR35 Forum meeting.

Held in May, the meeting heard HMRC assert that where PSCs are “hired to carry out identical roles,” on the same Ts&Cs, the “same [IR35] determination is therefore correct.”

That marks a change in the Revenue’s stance, as before it said that making a universal IR35 decision on a group of PSCs with the same roles and Ts&Cs could be merely “appropriate.”

As well as “appropriate” being upgraded to “correct,” HMRC also used the May meeting to quash widely-held, expert concerns that blanketing breaches the ‘reasonable care’ clause.

“Treating people in the same factual position in the same way meets the statutory obligation to use reasonable care,” said HMRC, at odds with analysis by Qdos, In-Touch Accounting and the IHPA.

HMRC’s interpretation of the public sector IR35 rules also seems at odds with what a leading barrister, Jolyon Maughan QC, has argued, when he was called as an expert witness to give evidence to MPs.

Yet the Revenue has now provided a working definition (of sorts) for what does not constitute a blanket ruling, notably without specifying what does constitute a blanket ruling.

“Where workers are hired to carry out identical roles, with the same [Ts&Cs], and where the same determination is therefore correct…does not amount to a blanket ruling,” HMRC claims.

The only acknowledgement for forum members, who insisted blanket decisions are ongoing, was HMRC saying the universal ‘non blanket’ determinations it outlined were correct on “occasions.”

Like contractors, the members regard blanketing as unfair because it smacks of end-users not taking reasonable care to assess status and, ‘on the ground,’ working practices almost always vary.

The Revenue said in December that deeming all engagements inside or outside IR35, regardless of the contractual Terms and Conditions (Ts&Cs) and working arrangements, would be ‘inappropriate.’

The May IR35 Forum also heard that the public sector IR35 reforms have raised an additional £410m in income tax and NICs; that CEST is used an average of 40,000 to 50,000 times a month and that HMRC will explore if there are sector-specific issues with the rules.