PCG response to ‘Where are we now? An IR35 expert’s view’
Article written and submitted by PCG's publicity unit
PCG would like to respond to the Contractor UK article “Where are we now? An IR35 expert’s view,” in which Kate Cottrell offers her perspectives on HMRC’s latest guidance. We are the only not-for-profit representative association for freelancers and we are committed to securing a better, fairer environment for the UK’s 1.6 million freelancers.
As is stated in the article, we were members of the IR35 Forum along with a number of other bodies. We first proposed a system of ‘business tests’ to the Office of Tax Simplification (OTS) before the creation of the IR35 Forum. Far from being rejected by the OTS, as Cottrell suggests, the ‘business tests’ were one of three options, including abolition which they put forward to the government.
In the end the government opted not to put the “business tests” into legislation, which was our original proposal. However senior ministers and HMRC officials made it clear to PCG that the “business tests” could play a key part in HMRC’s new guidance, and this is what has happened.
Five major organisations, representing businesses, freelancers, the recruitment industry and the freelancer services industry all put their name to a joint statement criticising HMRC’s final decision to press ahead with a scoring system for the tests which could ultimately render them ineffective. Cottrell claims that [there was] an “IR35 Forum meeting yesterday [10th May]”.
PCG believes that no such meeting took place. An “operational approach meeting” for specially invited representatives of the accountancy profession did take place on this date, but as we are not an accountancy practice we were not invited, nor would we expect to be. The same is true for the other four organisations named on the joint press release. Therefore it is incorrect to imply that we avoided or refused an opportunity to discuss this issue with HMRC, on the contrary we have been present at every meeting of the IR35 Forum, unlike Cottrell.
Like any professional organisation, PCG has engaged constructively with all the other members of the IR35 forum, and we have kept abreast of their views and respected them. Cottrell, however, has repeatedly been alone in voicing her support for HMRC's position, including implementing the business tests with flawed scoring. She has not sought to engage with us constructively, instead choosing to criticise PCG in ill-informed and ultimately misleading articles on popular contractor news websites.
Cottrell also says “If you could stand up tomorrow and say that 95 per cent of contractors are low risk it would make no difference whatsoever to the need for them to consider their IR35 status for each and every contract they undertake.” This is directly at odds with HMRC’s own guidance. If a contractor is “low risk”, HMRC commit to not undertaking an investigation for three years, provided that individual’s way of working does not substantively change. Of course, PCG believes HMRC’s current scoring fails to identify a sufficiently large proportion of “low risk” businesses– but it is simply incorrect to suggest that being classified as low risk makes “no difference whatsoever”.
Finally, it is extremely disappointing that Cottrell concludes that the new measures “cannot be seen [...] as a missed opportunity, as there was no opportunity”. It is clear to PCG and presumably to every other member of the IR35 forum that the formation of the forum presented a clear opportunity to improve the way IR35 works. Indeed the Forum’s purpose, in its own words, is to “advise on improvements in the administration of IR35”.
If Cottrell does not believe this is an opportunity to improve IR35 then [PCG believes] it brings into question her true motivations for taking a seat on the IR35 Forum. Cottrell’s business of reviewing contracts to test their IR35 compliance [she is the co-founder of IR35 specialists Bauer & Cottrell] may make her knowledgeable about the subject, but it also appears [in PCG’s eyes] to have impaired her ability to commit to improving IR35.
As a not-for-profit association, run for and by its members, we remain committed to securing a fairer and better environment for freelancers and contractors. To this end, we will be constructively engaging with the IR35 Forum, consulting our members extensively, and engaging positively with other relevant bodies. We will constructively criticise HMRC where necessary, and our primary goal is to help and support our members and the wider freelance community.