It's Not Fine -- Specific Flaws With the New IR35 Tool

[WordIsBond]

I gave that answer and still come up outside

Both quite often apply to me though..?

You probably come up outside because of other answers.

My test was to run a scenario twice that was clearly inside on all non-SDC factors, and answer all SDC questions except that one clearly outside. The only difference between the two scenarios was on one I gave answer #1, and it came up outside, and on the other I gave answer #4, and it came up inside.

Here's what I think is happening, now that I think about it more. I think that answer #1 with all the right answers on other SDC questions gives you a clear pass on SDC, so you end up outside. And answer #4, for some reason, even if you have all the right answers on the other SDC questions, does not give you a clear pass on SDC. And if you fail on other tests, you have to have a clear pass on SDC or you'll fail.

But answer #4 should not invalid the fact that there is a clear lack of SDC in the scenario. A guy works from home, when he wants, can't be shifted from job to job, decides how the work should be done. He is not being controlled or supervised. Whether he's got more knowledge than the client or not, you are going to have a hard time convincing a court that he's a hidden employee.

[MPwannadecentincome]

error-prone and unfit for purpose

and the press reports....

HMRC blasted over "inaccurate" and "unreliable" IR35 online assessment tool

[teapot418]

Can the worker choose where they work?

Changing from:

Yes - the worker decides

to:

Partly - some work has to be done in an agreed location and some can be done wherever the worker chooses

puts you inside.

Almost everybody has to occasionally attend meetings/workshops etc.

[eek]

Can the worker choose where they work?

Changing from:

Yes - the worker decides

to:

Partly - some work has to be done in an agreed location and some can be done wherever the worker chooses

puts you inside.

Almost everybody has to occasionally attend meetings/workshops etc.

I think we can safely say that guidance notes are required and the answers are too simply, not specific enough and not clear enough....

[Semtex]

I think we can safely say that guidance notes are required and the answers are too simply, not specific enough and not clear enough....

guidance notes for who? you? who will not be on the hook for the liability or for the PS client who will?

[SueEllen]

Yes the killer question for SDC is this one

Once the worker starts the engagement, can the end client decide how the work is done?

1) The worker decides how the work needs to be done without any input from the end client =outside
4) The end client can't decide how the work needs to be done because it's a highly skilled role = at best undetermined...

And the bit I can't understand is why answer 4 is even there. It doesn't add anything to the first answer other than confusion...

The reason 4 is asked is due to the fact some experts e.g. university researchers, solicitors are employed but their employer cannot tell them what to do. They also have no management responsibilities.

I can't remember where I read this but it may have been in HMRC's literature years ago.

To differentiate between the two situations would be to ask do they have employees in the same expert role as contractors.

[jamesbrown]

Yes the killer question for SDC is this one

Once the worker starts the engagement, can the end client decide how the work is done?

1) The worker decides how the work needs to be done without any input from the end client =outside
4) The end client can't decide how the work needs to be done because it's a highly skilled role = at best undetermined...

And the bit I can't understand is why answer 4 is even there. It doesn't add anything to the first answer other than confusion...

Agreed, I think this is the critical distinction w/r to the likelihood of being outside vs. undetermined on the basis of D&C alone. As I've posted elsewhere, relevant cases on the significance of the "how" element of control for a professional person include Marlen and Primary Path, where the judgements noted that, to be determinative, there needed to be a right of control and sufficient evidence of supervision of the work, beyond one that might be expected of an independent contractor.

Notable quotes from Primary Path:

The question of control – or the degree of control which points to a situation of employment – is problematic in the case of a person who is engaged for his specialist skills. The “master” himself may well not have the skills or experience to give specific direction to the “servant”, and in the case of Morren v Swinton and Pendlebury Borough Council Lord Parker CJ said: “…clearly superintendence and control cannot be the decisive test when one is dealing with a professional man, or a man of some particular skill and experience.” In such a case one must look to more general questions of the level of supervision.

All in all we consider that there was a minimum supervision of Mr Winfield on the part of GSK – he was hired for his expertise to be part of a team for a particular project, and subject only to such supervision and direction as was necessary for and in the course of the management of the project as a whole he was left to do the work as he saw fit. The level of control or supervision exercised did not go beyond that which one would expect in the hiring of an independent contractor. Whilst we take note that the question of control should not be given too much significance in the case of a specialist worker, in so far as it is brought into the balance in this case it points away from a contract of employment.

I think where the tool goes wrong is to interpret "limited" significance as neutral or no significance. It should be given some weight.

Furthermore, the actual significance will depend on the facts; for example, a professional person may be contracted to work alongside other professionals, including employees of the client, who could, in principle, SD&C the contractor. In that case, it should be determinative and the answer to the question should be (1), i.e. no control, and not (4), unable to control. However, this level of nuance is far beyond the average person that is likely to be exposed to this tool. They will see the term "highly skilled role" and assume that (4) applies, when it probably doesn't.

[WordIsBond]

Agreed, I think this is the critical distinction w/r to the likelihood of being outside vs. undetermined on the basis of D&C alone. As I've posted elsewhere, relevant cases on the significance of the "how" element of control for a professional person include Marlen and Primary Path, where the judgements noted that, to be determinative, there needed to be a right of control and sufficient evidence of supervision of the work, beyond one that might be expected of an independent contractor.

Yes, that's the case I was vaguely remembering.

I don't have a problem with having alternative #4 on the test, since it does make a difference (though it should be worded such that #1 and #4 are mutually exclusive). The problem I see is that how it is weighted in practice doesn't reflect this wording:

The question of control – or the degree of control which points to a situation of employment – is problematic in the case of a person who is engaged for his specialist skills. The “master” himself may well not have the skills or experience to give specific direction to the “servant”, and in the case of Morren v Swinton and Pendlebury Borough Council Lord Parker CJ said: “…clearly superintendence and control cannot be the decisive test when one is dealing with a professional man, or a man of some particular skill and experience.” In such a case one must look to more general questions of the level of supervision. (emphasis added)

In the test case I ran, the specialist decides not only how, but when and where, the work is done. There doesn't seem to be any "looking to more general questions of the level of supervision." To have that one question determine whether a case is outside or inside, based on whether you answered 1 or 4, seems to ignore the fact that SDC still must be determined, just more generally, in the case of a specialist.

[jamesbrown]

There doesn't seem to be any "looking to more general questions of the level of supervision." To have that one question determine whether a case is outside or inside, based on whether you answered 1 or 4, seems to ignore the fact that SDC still must be determined, just more generally, in the case of a specialist.

Right. It's something they could address more clearly and consistently with the case law. I also don't have a problem with option (4) or the increased probability that it leads to an undetermined outcome - afterall, it is about case law, and some of that is beyond the scope of an online tool - but I don't think they've phrased the options properly, included all relevant options (such as working on a highly skilled task alongside highly skilled employees of the client), or weighted them correctly.

[northernladyuk]

I think we can safely say that guidance notes are required and the answers are too simply, not specific enough and not clear enough....

Surely it needs to be vague. The vagueness and fear is where HMRC rakes in the cash.