HMRC not heeding contractors’ concerns about IR35
by Alan Little
HMRC has started a consultation to cover the private sector under the scope of IR35. It has published several documents, supporting the introduction and benefits of IR35 in the public sector, and how the same can be done for the private sector. But, IR35 experts, such as Kate Cottrell, disagree.
Cottrell says that HMRC insists that the introduction of IR35 in the public sector has been a major success, basing this premise on a document published by HMRC and HMT. As a result, HMRC says there is no evidence to support that contractors are being forced to work through umbrella companies, contractors have increased their rates, public sector organisations are opting for blanket IR35 assessments, or that there is a problem with CEST.
Cottrell points out that researchers from HMRC surveyed 108 contractors from the 50,000 affected. So, the information gleaned is inaccurate as it does not give the true picture of how IR35 was implemented in the public sector and the way it affects contractors.
Together with the consultation documents, HMRC also published a factsheet. But, it does nothing to support the claims of the contractors and freelancers who say they have been adversely affected by the implementation of IR35.
She also mentions that the factsheet does speak about CEST, which is biased in judging the status of a contractor as it does not take into account mutuality of obligation. The factsheet does not provide details of working practices or contracts in an example, so it is difficult to find out whether the contractor is genuinely inside IR35. The factsheet also does not touch on substitution, where the substitution, when agreed by a company, would be considered outside IR35 by the CEST tool.
Cottrell pointed out that HMRC does not want to listen to contractors, umbrella companies, and other independent workers who work for public sector organisations. This has prompted several IR35 tribunal cases, with contractors winning most of them. Of the four cases presented to the tribunal, HMRC has won only one case.
She says that the HMRC was aware of the four cases before it published the recent IR35 reform consultation to cover the private sector but chose to leave out the cases from its consultation documents. Cottrell went on to advise contractors to apply to HMRC for a NIC refund if they are being assessed as inside IR35 while working for public sector organisations and bodies.