Status experts endorse HMRC’s IR35 blanketing model
Last week, tax advisory Qdos Contractor found fault with the model, saying that although identical terms and working practices should produce the same IR35 status decision in theory, “in practice” it may not.
“IR35 ‘blanketing’ based on similar sets of circumstances risks glossing over or ignoring important details which could feature in an IR35 enquiry further down the line,” the advisory warned at the time.
But last night, tax specialist David Kirk said it was "generally quite legitimate" for clients to decide that if one PSC's contract is the same as its other PSCs' contracts, the IR35 results would be the same too.
“There are factors which may change that [such as ‘being in business on one’s own account’], but such factors are not known to the engager,” the founder of David Kirk & Co told ContractorUK.
He added: “The ‘business on account’ test under IR35 is something that similarly, CEST cannot cope with. But the engager can only be expected to look at the contract, terms and working practices of the assignment that it alone is responsible for.”
Kate Cottrell, an expert on IR35, says end-users who select a ‘sample contractor’ -- a PSC with terms and working practices which mirror those of all their fellow contractors, are taking a “common sense” approach to IR35 decision-making.
She also told ContractorUK: “It is obviously possible to have two, or more, people undertaking the same work and being subject to the same day-to-day working practices, in the eyes of the end-client.
“In the public sector, we often saw IR35 assessments with the same answers given by the end-client for two different contractors and consequently the same IR35 result.
“The fact that the end-client has the evidence of its process and attributed this on an individual basis may amount to ‘reasonable care’”.
'Storm in a teacup'
Although there is no certainty for such engagers until this approach is tested in the courts, the ‘for’ and ‘against’ arguments of HMRC’s ‘blanketing’ model were also said to suffer from uncertainty.
“At this stage, this is very much a storm in a teacup,” the co-founder of Bauer & Cottrell said. “We know that the government is planning to ‘refine the design of the reform’ and ‘further explore consequences of businesses failing to take reasonable care.’
“So plans cannot be accurately made until we have sight of the promised consultation document and certainly not [sealed] until we see the draft Finance Bill in the summer.”