New Status Determination Statements split contractors’ IR35 advisers

A statement that engagers must draw up and compose under 2020’s Off-Payroll Working Rules for the Private Sector is dividing advisers, as to whether it is for the better or worse.

Matt Boddington, a director at Chartergates, says the Status Determination Statement appears to be an “improvement” to the IR35 ‘conclusion’ statement used by public sector engagers.  

His reasoning is, partly, that under the draft IR35 legislation, the ‘SDS’ must contain a client’s rationale for making the inside/outside decision about the PSC’s status, “from the outset.”

'More transparency'

But Julian Ball, a director at PayStream, points out that the SDS represents an “additional responsibility” on the end-client and, in turn, it triggers four further responsibilities.

The four are; relay the determination down the chain; retain evidence of the rationale; hand evidence to the PSC/agency if asked, and deal with any appeal by the PSC inside 45 days.

Yet according to tax body the ATT, the mere issuing of the SDS should provide “more transparency” and “help to reduce” the risk of incorrect IR35 status decisions.

'Clarity around the meaning'

But not if the SDS’s contents are scant. “The client ‘complies’ if it provides the decision with reasons to the party contracting with it,” begins agency body APSCo, citing the draft rules.

“[We] believe there should be more clarity around the meaning of a status determination statement…[including on] how much detail should go into this reasoning.”

More from HMRC is indeed needed, hints Nigel Morris, a director at MacIntyre Hudson, yet not necessarily in the area flagged up by the Association of Professional Staffing Companies.

'Kicks the can down the road'

“If a worker disagrees with a status determination, the client is required to review the decision within 45 days and either change it, or confirm that it is correct and provide the reasons.

“However [the draft legislation] does not go on to say what happens if the worker is still not satisfied. So, it just kicks the can down the road for another 45 days. We would like to see HMRC agree that at this stage they would step in to arbitrate,” he said.

Though, in APSCo’s eyes, the issue regarding HMRC is that end-users who pass the SDS down the chain qualify as compliant, “regardless” of whether HMRC later deems the decision wrong.

'Blanket-caught Status Determination Statements'

Yet it’s the claims of HMRC – which believes that the SDS will help head-off ‘blanketing’ – that bother Mr Boddington, who formerly worked in employment status at the Revenue.

“It remains unclear how end-clients, fearful of potential liability and making complex status decisions will be disincentivised from simply issuing blanket ‘caught’ Status Determination Statements”, he said.

But in its analysis of the draft IR35 legislation, accountancy firm Blick Rothenberg echoed the official stance, saying: “When assessing a freelancer’s status, clients must complete a status determination; so in theory there can be no blanket assessments placing contractors inside IR35.”

'The likely decisions are not IR35 decisions'

Adrian Marlowe, managing director of Lawspeed holds entirely the opposite view. “We fear the resulting administrative burden and associated risk [of the SDS requirement] will inevitably induce blanket decisions.”

He added: “The decisions that are most likely to be made are not IR35 decisions, they are the decisions not to use any affected company contractor, perhaps save in very obvious ‘outside’ circumstances, so avoiding application of the rules in the first place.”

And an online post by Markel Tax indicates that Mr Marlowe is right to talk of ‘associated risk.’

“This [Status Determination] Statement must be provided to the PSC worker and the party who directly engages the PSC. 

“Until this has been provided, the end-client business will stand in the position of ‘fee-payer,’ meaning they’re responsible for ensuring the correct tax and NI treatment with all the potential liabilities to tax and NI,” the firm wrote.

'Statutory process'

Still, for contractors at least, SDS is better than the status quo in the public sector. “[The client’s status decision] can now be challenged by the worker….under a statutory process,” points out Chartergates’ Mr Boddington.

But the Association of Recruitment Consultancies, which is chaired by Mr Marlowe, regards the SDS and the result of not adhering to it as new complexities, in an already complex area.

The ARC said: “With the inclusion of an obligation upon a hirer to give reasons for the outcome of its IR35 assessment, and liability for the tax and NICs if reasons are not given, the rules are now more complicated than ever.”

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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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