HMRC on track to hit IR35 investigations target, not exceed it

The taxman’s three new IR35 compliance teams are on course to increase the number of investigations into contractors suspected of being caught by the legislation ten-fold this year.

Issuing the update at the latest IR35 Forum meeting, held on January 22, HM Revenue & Customs said the trio, based in Edinburgh, Croydon and Manchester, had made “good progress” since their formation.

While they are no longer projected to “exceed” the ten-fold jump in IR35 probes - as HMRC said in October, the teams are on course to hit the target of 230 or so cases vowed to the Public Accounts Committee.

But since that public commitment, some of the IR35 officials pursuing contractors have demanded copies of ‘upper contracts,’ giving the impression that they will make a beeline to the end-users for information.

“This was causing anxiety as such contact had in the past led to loss of contracts,” state the minutes, published on Friday.

“HMRC said that they will always in the first instance try to get information from the customer under enquiry. Nevertheless, they reserved the right to approach third parties if they considered it was necessary.”

Speaking more generally, HMRC advised that all its IR35 guidance – including the IR35 Business Entity Tests and the Employment Status Manual – were currently under review, “not a re-write” it clarified, “but a refresh.”

That may please industry members of the forum, such as IR35 advisory Bauer & Cottrell and agency body the Recruitment & Employment Confederation, who say that the BETs are not “easily accessible” on HMRC’s website.

Turning to statutory rather than administrative reform of IR35, the Revenue said it was not the intention of the recent amendment bringing ‘office holders’ in scope to apply it in circumstances “where the office holder was the office holder of their own company.”

Further criticism of HMRC – and more direct than the implied lack of access to guidance or clarity about legislation, came from one member keen to detail how contractors at the Department of Health targeted for IR35 enquiries have been “treated badly” by tax officials.

Agreeing to investigate the claim, HMRC invited all forum members to provide redacted details of cases where HMRC’s treatment has made recipients “very unhappy”, apparently due to its IR35 letters.

Signs at the meeting of additional disquiet from contractors also serving the public sector followed. According to the minutes, a public body has requested that its contractors provide an HMRC “certificate” to show an outside-IR35 position.

Admitting that there is no requirement for any public body to see any document from HMRC, the officials explained the request likely arose from the need for state end-users to “satisfy themselves” that the engaged contractor is IR35-compliant, as HMRC’s guidance to them makes clear.

The next IR35 Forum meeting, scheduled for April 29, could see the release of HMRC figures for its Contract Review service; the uptake of the BETs and clarification on the position of dividends under the RTI system.

 

Editor's Note: Further Reading - What January's IR35 Forum says to contractors

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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