Status experts slam HMRC’s ‘inept’ IR35 factsheet for contractors

An IR35 reform factsheet from HMRC – drawn up entirely “for contractors” – has ‘ineptly’ only been published on the Treasury’s website, outraging a leading status expert.

Despite being about tax, the only two-page factsheet is not even available on HMRC’s website, and is not being sent to PSCs -- at odds with its title “Factsheet for Contractors.”

“If it wasn’t for us advisers and you press picking it up, would this ‘factsheet for contractors’ even be known to any PSC, let alone read by any contractor?” asked the expert, Kate Cottrell.

“Even more outrageous is that not only is it absent from HMRC’s site, but it’s also been issued now -- just a few weeks shy of the review [ending, and] a few months shy of reform.”

'Disgraceful'

The Bauer & Cottrell co-founder was equally critical about the IR35 review, which an agency source last night said, “looks like the result of Sajid [Javid] mis-speaking on Radio 4.”

Cottrell, who used to work at the Revenue said: “It’s an invitation-only review; with no email address to submit representations to and is dependent on HMRC calling you up to take part.

“Many parties saying they will ‘make themselves available’ are doing so in the hope that HMRC will choose them to take part. But those likely to be critical won’t be top of the list.

She added: “What needs to be released is the government’s response to the draft IR35 legislation consultation. Then, we would all have something to review to tell the review. But there’s no document, no guidance, not an even an inbox to send views to. It’s disgraceful.”

'Inept'

Speaking on condition of anonymity, a former tax inspector said that the government’s response to feedback on such draft legislation would usually get released at the Budget.

“That was meant to be in November, but the autumn Budget was cancelled. So the [government] response to the draft -- like the final legislation itself, is likely available, yet it’s still under wraps.”

The ex-inspector added: “Like the factsheet, it’s all rather inept. The government is the same government [we had] pre-election. So why not share its draft IR35 legislation consultation response?”

'HMRC not in listening mode'

A recruiter says the ‘Small Company’ exemption and ‘Reasonable Care’ are two points HMT vowed to clarify. But it hasn’t. “If chosen, I’d be contributing to the review ‘blind,’” he said.

At WTT Consulting, expectations are being firmly managed. “We cannot expect anything to come of the review. All stakeholders now need to prepare extensively for the reforms.”

The tax advisory reasoned:“[As HMRC will judge the] extension in the public sector as successful…we’d expect it to be in ‘education mode,’ not ‘listening mode’ as it should be.”

The taxman’s supporters will say the factsheet proves he is educating. The PDF is split into seven parts for ease-of-use; it identifies who is affected and outlines “What you need to do before April.”

'Contractors driving the process'

But the latter section is causing concern. “You might notice that HMRC states contractors ‘do not need to take any action before April,’” observes Qdos.

“However,” the advisory added in a v-log, “what we’ve found is that a lot of the engagement that we are having with private sector engagers is driven by contractors.

“So, contractors approaching their client and asking what they’re doing [about IR35 reform from April], is often a good way of starting that process [of getting organisational measures put in place].”

On LinkedIn, contractors are trying to align the HMRC advice of ‘do nothing’ with everything that they have been doing – sorting invoices, setting payment-received dates and finalisng contracts (among other tasks), especially where engagements straddle the April 6th commencement date.

'Absolutely ludicrous HMRC advice'

“If it is indeed technically true [that PSCs need not take any action, as the factsheet claims], it doesn’t feel like entirely honest advice from HMRC,” one contractor posted.

Cottrell echoed: “The claim in the HMRC factsheet that contractors need not take any action is absolutely ludicrous. At best, it’s disingenuous. It screams that the Revenue simply doesn’t have a clue.

“To give you just some idea, we are doing lots of reviews -- probably our most complicated [reviews] yet due to the reform, and we’re constantly advising contractors that they must talk to ‘x’ person at ‘y’ organisation if they want ‘z’ result, or even just to find out if ‘z’ is possible.”

'Taxman muddying the waters'

The other ex-tax official said that the Revenue was constantly “muddying the waters” by claiming that the ‘genuinely self-employed are not affected’ by the reform. She said:

Some organisations where the genuinely self-employed work on behalf of are culling their PSC contracts outright as organisations don’t want to take the risk of having them, even if PSCs are outside [IR35] and truly self-employed. The taxman is just not living in reality.”

Lucy Smith, managing director of Clarity Umbrella agrees. “IR35 hasn't changed – it’s just the liabilities which [from April 6th] sit with the end-client.

“If you [the PSC] have been operating properly then things shouldn't alter. The issue only arises when the end-client is not prepared to assess each individual and pushes all through the ‘employed’ route as inside IR35,” she said.

In the HMRC factsheet, it says that “if you think you may be affected” by IR35 changing, such individuals “should seek a Status Determination Statement from your hirer.”

'Ambiguous wording'

A niche staffing agency reflected: “The ambiguous wording [from HMRC] makes us worry that we -- the party doing the hiring, are going to have contractors ask us for Status [Determination] Statements. It’s actually the responsibility of the engager.”

“We’d also question how many [people reading the HMRC factsheet] are going to know what a Status Determination Statement is. There are links in the factsheet, but it doesn’t go into much factual or practical detail about the SDS.”

Told of the calls for the government to release its draft IR35 legislation consultation response, the agency’s co-director added: “HR teams, mid-sized firms and even one very large agency boss we know have all asked us what an SDS is, because they didn’t know.

“Given the lack of clear, practical and definitive information from HMRC, which might indeed be cleared up if the government’s response to the [IR35 legislative] draft [was published], more and more engagers will panic and simply ban PSCs. One wonders if that’s HMRC’s intention all along -- unofficially of course.”

'First IR35 review event is this week'

Another niche service provider, Mazars, an accountancy firm, says it will be tabling five concerns about the incoming IR35 framework to the taxman’s representatives this week, albeit through its representatives.

“The government has announced a number of round table meetings with key stakeholders [as part of the IR35 reform review], the first taking place this week, where [we] will have representation,” the firm said.

“We are currently providing support to a number of organisations to assist with their preparation for the new [IR35] rules from April 2020, including assisting with identifying contractor populations, [and] carrying out detailed status assessments”.

Mazars added: “We have also been looking at the broader interaction with reward strategy in light of the potential changes to internal team structures, particularly in the technology, finance, logistics and construction sectors.”

Editor's Note: Related --

HMRC asks for its IR35 contractor factsheet to be sent 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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