IR35 Forum’s February 2019 meeting: at-a-glance
On top of both its industry members and HMRC itself saying IR35 reform planned for April 2020 is already inspiring clauses and intermediary models, the IR35 Forum heard developments in three main areas at its Feb. 2019 meeting. The three are below, following some initial context.
The meeting: setting the scene
- The Forum’s Feb 28th meeting was its last before the rollout of the Off-Payroll Working in the Private Sector consultation, but the official representing the Treasury, which wrote the consultation proposing the new framework, did not attend.
- The Forum’s not universally supported ‘reconstituted membership’ (this reconstitution prompted one prominent industry member to quit), was clearly displayed at the February meeting.
- The meeting saw as many as almost 10 tax officials present, precisely matching the number of industry representatives who, under proposals in 2017, have been capped to one person per invited representative body.
- The Forum’s February meeting precedes the next meeting some five months away – in July 2019 (‘provisionally’).
1. CEST: HMRC quietly making U-turns
- Despite HMRC’s previous stance on CEST (that it’s ‘working well’ and has ‘no plans to change CEST’— said in June 2018), HMRC now says it will “enhance” CEST. Discussions and user tests were encouraged from non-HMRC members.
- HMRC handed members a discussion paper on Mutuality Of Obligation. Its contents reflect non-members’ points about MOO and what HMRC calls ‘public discussion’ – presumably about the Revenue’s interpretation of MOO differing to almost all other interpretations.
- Members have a deadline to feedback on the paper by June 7th 2019.
- The industry members will help HMRC to consider how officials can put MOO into CEST. The Revenue’s aim to look at including MOO in CEST is new, and follows criticism of HMRC for excluding MOO from CEST.
- The tax office’s “IT teams” are onto the CEST enhancements, but a timetable was not provided other than HMRC acknowledging that the better version of CEST needs to be released “as soon as possible.”
2. Timeline and key dates
- In line with the expected timetable of private sector IR35 reform, HMRC confirmed that summer 2019 is scheduled for publication of the draft regulations to implement the changes, which are still set to come into force from April 2020.
- HMRC reiterated that it has no intention to probe, research or test the public sector IR35 reforms – introduced in April 2017, but said respondents to the May 2019 consultation could mention them.
- “Many” clients of the representative bodies present, which included the ICAEW, CIOT and IPSE, are “unaware” of the 2020 reforms.
- Education and “awareness-building” from HMRC was said to start in earnest post-May 2019, which industry members said would hopefully enlighten engagers who are unrepresented on the forum.
3. Tax, umbrellas, avoidance
- The department’s fraud units are scrutinising so-called disaggregation models, where “companies split into smaller companies,” also known as mini-umbrella companies. According to the industry members, these umbrellas now have less of a presence, which pleased HMRC.
- Umbrellas were also mentioned in the MOO paper handed to non-HMRC members, and were addressed in relation to gaps between a series of contracts. For tax purposes, the Revenue would consider each contract individually.
- HMRC’s avoidance publication Spotlight, which featured umbrellas in edition 45, was declared “excellent’ by industry members, at odds with the concerns of experts who have spoken to ContractorUK.
- Data analyst teams at HMRC will consider, in relation to IR35, whether they can draw up how NICs are spilt between Employer and Employee Contributions.
- The Revenue said there was “no discrepancy” between its estimate of impact of non-compliance with IR35 (£1.3bn in 2023/24), and its estimated amounts of additional revenue in the same year (£725m in 2023/24).