HMRC launches new IR35 guidance

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HMRC has launched new IR35 intermediaries legislation guidance, following a critical House of Lords review of the law.

The Lords' four-month investigation into IR35 found “considerable hostility” to the regime among contractors. It called on HMRC to do more to show revenue protection provided by the legislation outweighs its cost.

In response, HMRC has published updated guidance, which provides an overview of the legislation, what to do in case of an enquiry and how to work out if IR35 applies.

The Revenue said the publication will make IR35 more ‘user friendly’. 

But Seb Maley, operations manager at IR35 experts Qdos Consulting, said HMRC may not satisfy the Lords’ criticism.

“There are some elements of the guidance that will provide extra help and understanding, but there are also a few areas that leave some question marks as to what the Revenue are getting at,” he said.

While Maley added the guidance revamp was a step in the right direction, he said more could be done by HMRC to make the legislation easier for contractors to understand.

Certain elements of the guidance, such as highlighting the Revenue’s free IR35 review scheme, the Contract Review Service, could be a cause for concern, according to Maley.

The service allows contractors unsure of IR35 status to send an application in to get an opinion of whether they are inside or outside of the legislation.

But Maley warned that using this could invite the Revenue to start an enquiry into a client's affairs.

"Accountants should be aware that it would be dangerous if they thought the review service is something clients should take advantage of, as it could potentially put them at risk of being subject to IR35 enquiry.

"If they aren’t experienced enough to handle reviews I would suggest they go to expert rather than the Revenue directly," he said. 

Maley continued that while the Revenue says the service is confidential, as it develops it's "clear they will get inspectors involved".

"If you still disagree with the Revenue's opinion, then you can raise an appeal notice. But the only way of doing that is for HMRC to give you an NIC and tax demand, which is fast-forwarding to the end of an enquiry, basically saying that this is what you owe and if you disagree, you can appeal and go to a tax tribunal," he said. 

What do you think of HMRC's updated guidance? Does it make it easier for contractors to understand?

Comments
lme's picture

when was this issued please    1 thanks

lme | | Permalink

there seems to be no date and I cant find it on hmrc website

a link to the page you can download it would be helpful

 

frankly I think this whole area is a bit of a nightmare. A hge palaver even trying to explain it.  Why can't HMRC just say something like "If anyone works for more than 6 months full time or 12 months more than 20 hours per week, they must go through paye" . I can see this would "catch" genuine consultants on long contracts such as the pwcs etc of this world, but surely then the employee could be paid as an employee of both and the client could make an extra payment to the service organisation for provision of staff. It seems to me to be shifting loads of risk and work onto the little guys, particularly when contracts area really short. even if they could say something like anything less than 3 months with no renewals within 2 years it would surely save a lot of hassle.

Or am I missing something?!

@lme Yes IR35 scandal hits the low paid hard, particularly OAPs

dstickl | | Permalink

 In an ageing population that's also suffering undue dementia, as we have in the UK today, the IR35 scandal is particularly nonsensical and hits the low paid hard, particularly OAPs, so I've drawn up a self-explanatory e-petion calling for an ESC (HMRC Extra Statutory Concession) to immediately Stop IR35 for pensioner workers not registered for VAT. 

 In my opinion that modification was  - in part - effectively previously promised in some of the earlier General Election Manifestos of both the Conservative and also the Liberal Democrat political parties, which allegedly wanted to do away with IR35.

 For those who also care about the unfortunate current "UK GDP Output Gap", caused in part by IR35, here's an illustrative Case Study, "Fred OAP": 

 Pensioner Fred is called back to his "old factory" by his ex-employers who cannot any longer efficiently run e.g. “Process 31”, and need Fred to come in a few days each month to improve the productive process etc, of Fred’s former/favourite specialty of “Process 31”.   Fred's ex would like Fred to work through a Ltd Co, to avoid having to pay sick pay, etc.  However, Fred fears he may be IR35-caught, and Fred also fears he may suffer the trauma of an HMRC "dawn raid" experience.  So deadlock.  Fred just sits at home, watching TV, and gets dementia out of boredom; the NHS incurs costs to deal with Fred's premature dementia, obesity, etc.  Fred's ex-employer has an inefficient process, makes reduced profit/s and Corporation Tax payments to HMG/HMRC, and has no easy way to Fred's intellectual capital.  A doubly bad outcome for UK plc (of extra NHS costs and reduced taxation revenues) due to IR35 suffering from scope creep from the original "Friday-to-Monday" Labour Party asserted scenario. 

stepurhan's picture

Repeated question    1 thanks

stepurhan | | Permalink

@dstickl

You've been asked this before and didn't give a decent answer, but let's try again.

Why is it you are only in favour of abolishing IR35 for OAPs? It has already been pointed out to you that trying to bring an exemption in for OAPs alone will bring additional complexity to an already complex area of law. If you think IR35 is genuinely unfair then why not campaign to have it abolished for all? All workers potentially caught by IR35 have the same worries as Fred in your "case study".

Your argument has only ever been that "old people will have valuable skills" but that is neither proven, nor going to be universal. To then effectively assert that being free from IR35 will do away with the ailments of old age, or that old people denied work will not find other pursuits to keep them active is ludicrous. In fact, it is quite insulting to the older population that only by being able to operate outside IR35 will they be able to keep from withering and dying. I know of many active pensioners who don't need tax law exemptions to keep themselves going.

Why all the fuss about IR35?

louisVW4 | | Permalink

Surely, if you are subject to IR35, you pay it.  If you are subject to PAYE, you pay it.  The fuss appears to be where you are subject to IR35, but don't want to pay the tax.  Therefore, accountants get dragged into complex or downright stupid schemes to cheat the tax man.

Complete the Business Entity Test.  It's very simple.

What I would like to see is more action taken by the HMRC against IR35 cheats.

A case I am involved in shows the director of the one-man company in question did all the usual dodgy things.  Cheated his partner and co-shareholder out of dividends, committed 'Unfair Prejudice' (and is still trying to unwind his deceit), and did not pay IR35 for a number of years, if at all.  The BET clearly demonstrates his liability, but I will not hear from the HMRC if they've done anything about it. He even went so far as to complete his partner's self assessment (being a financial 'expert'), including dividends not actually paid.  A simple review of the director's payment liability (school fees, large mortgage, etc...) would raise a big red flag over how he managed to pay when earning only £700 per month + £10K pa dividend, while the company billed £120K pa.