We're aware of HSBC-like intermediary models, IR35 officials say

The intermediary-style model that HSBC has proposed for September -- seemingly to remove itself from IR35 reform concerns from April -- has not gone unnoticed by the taxman.

According to fresh minutes from the IR35 Forum, HMRC has suggested being displeased at a “new model” based on the “insertion of an additional intermediary into the supply chain.”

“HMRC are onto it,” says ex-forum member Kate Cottrell, reflecting yesterday on point 20 in the minutes, published online. “A look at HMRC’s guidance notes show it does not work anyway.”

'Wheeze'

The Bauer & Cottrell co-founder also told ContractorUK that pending 11th hour changes to the rules, the March 2019 off-payroll working consultation further defeats what is being called HSBC's ‘wheeze.’

“The insertion of another intermediary… doesn’t work [according to] the consultation, which says it [liability] falls back to the intermediary nearest the client. That said, who knows what the final rules will look like.”

Absent of definitive guidance from HMRC, it is falling to status experts like Cottrell to unpick whether the intermediary model will be compliant, because recruiters are among those who are uncertain.

'Struggling with the bank's logic'

The co-owner of a small but specialist financial services agency who knows contractors at HSBC but does not wish to be named, said : “I’m still struggling with the bank’s logic here.

“To my mind, if the published IR35 plans hold, then the obligation to determine the IR35 status of each worker sits firmly with the hirer, no matter how many third, fourth or fifth parties sit in between.”

Potentially unsettling for engagers favouring the intermediary model, HMRC used the February IR35 Forum to acknowledge it is “aware of the increased use of intermediaries.”

'New clauses relating to the reform'

Furthermore, while some engagers are “unaware” of the 2020 framework – non-HMRC members said, significantly “some contracts are starting to include new clauses relating to the reform.”

This may help explain why “HMRC are aware of the need to release the enhanced version of CEST as soon as possible,” tax officials said, before reiterating they stand by CEST's results.

But changing tack elsewhere, the officials said HMRC would now look at including Mutuality of Obligation in CEST, despite many months of them insisting that the tool is right to exclude it.

The Revenue’s other IR35 guidance also came in for criticism at the meeting, with members saying there is a need for more detail from the tax authority on technical and complex areas of the legislation.

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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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