Blanket IR35 decisions to face MP scrutiny – QC
“In two years’ time this committee is going to be looking at a different question”, began the barrister, a director of the Good Law Project, who gave his evidence to the MPs on Tuesday.
“[The question will be] whether the BBC and the NHS were right to force everybody to be taxed as employees in circumstances where the case law has shown, after the fact, that very often that those people were properly taxed as self-employed.”
“The NHS; government departments engaging IT contractors [and] the BBC are all adopting very very low-risk approaches to those engaged on freelance contracts through PSCs
“And,” continued Mr Maugham, “they’re saying ‘everybody is, in effect, an employee’ [but they’re saying this applies] in circumstances where the law does not support that conclusion.”
He said: “Individuals who are doing… [CEST] and arriving at an inconclusive result are being told by [end-users such as] the BBC that they have to be taxed under PAYE, even in circumstances where that result is -- in some cases -- just wrong.”
The Deveraux Chambers barrister has also suggested that, because they paid themselves as ‘outside IR35’ which 'led to the tax problems they have,' the PSCs were “poorly advised”.
“[But] over the years, a focus on ‘take-home pay’ has also developed with accountants providing calculators on their website -- the vast majority of which display 'outside IR35' [take-home pay] figures.
“Some newer contractors tend to use these calculations as a basis for choosing an accountant, rather than considering their expertise or proficiency. Therefore, in some cases ‘good’ IR35 advice may come second, behind winning a client, and advice about the risks of trading 'outside IR35' may not be as forthcoming as it should.”
Another explanation as to why PSCs at the BBC were advised to treat their payments as inside IR35 (when the opposite better reflected their circumstances), has its roots in poor policing by the taxman.
“Advisers may have taken their cue for HMRC’s inaction,” Mr Maugham submitted to the MPs.
“Advisers would have been looking around at perhaps a decade…of complete inaction by HMRC in this sphere, and thinking to themselves ‘well if HMRC aren’t taking any action in relation to [outside IR35 payment] arrangements involving broadcasters, perhaps our advice in the past [to operate PAYE on the entire sum paid to the PSC] has been too conservative.’”
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