IR35 Forum: key points of its May 2018 meeting

As well as spelling out when across-the-board IR35 decisions about groups of public sector contractors are “legitimate” and “correct,” HMRC also told the May IR35 Forum:

• Compliance has improved as a result of the reform of IR35 in the public sector in April 2017.

The supporting evidence given by HMRC was that, “In the first 10 months [since reform], an additional 90,000 engagements have been registered on RTI equating to 58,000 individuals paying income tax and NICs.”

Previously, more people joining the payroll was clarified by HMRC to not, on in its own, be an indicator of improved compliance, after Treasury minister Melt Stride suggested it was.

• The department estimates an additional £410m of income tax and NICs have been remitted since the public sector reform was introduced.

The department has reproduced the figure in HMRC’s annual report for 2017-18. The figure is broadly in line with Treasury’s initial forecast.

CEST

• Usage of CEST is now fairly steady at around 40-50,000 per month.

The determinations were said by HMRC to be matching similar tools in the private sector, by finding 60% self-employed, 40% employed.

However, anecdotally, the employed ratio is much higher. At the BBC for example, the DCMS Select Committee has received evidence that 97% of BBC presenters are deemed employed/inside IR35.

• “Much has been made” about HMRC not releasing documents from CEST development meetings. But HMRC also says it’s “important to recognise that CEST was developed using agile methodology. “This means changes are made iteratively, with lawyers and other experts present. CEST has been tested using the core case law that people would expect, and details of those results have been published.”

Sector-specific

• HMRC does not have sector-specific data on IR35 reform issues, although it will investigate whether it is possible to find out whether there are particular issues relevant to some sectors.

Experts on employment status last month pointed out that the broadcasting sector is a special case, and the Revenue has traditionally agreed by producing IR35 guidance tailored for it (with no other sector permitted to use it).

ICAEW’s concerns

• The department addressed the ICAEW’s concerns about the public sector IR35 legislation and agreed to work with them on improved guidance on the existing rules.

What does ‘good’ look like?

• The department is “exploring the feasibility” of setting out standards/expectations of employment agencies and umbrella companies in relation to tax. Tax officials will report back to the next Forum meeting about whether this can be taken forward.

Further examples

• The department has shared with Forum members draft examples of exceptions and exemptions, especially on ‘outsourced services.’ Once the examples are agreed, the examples will be “reinstated” on the Gov.UK website.

Online

• The new terms of the reconstituted IR35 Forum have been published on the forum’s website.

• The department’s MOO Paper (published since these minutes) is subject to HMRC’s consideration following “the helpful feedback” received” from members.

Despite the implication that members’ feedback would be factored in to the final draft of the paper, many IR35 Forum members have distanced themselves from the paper since publication on the forum's website. No (external) members appear to have spoken up to endorse it.

Future meet-ups

• A roundtable event for IR35 Forum members to respond to the private sector IR35 reform consultation was offered by HMRC.

ContractorUK understands that the roundtable was held on Friday July 20th.

• The UK’s largest employers group, the CBI, is to contact HMRC to share details of the IR35 Working Group.

The group has previously been critical of making engagers liable and responsible for deciding the IR35 status of contractors they engage – the thrust of the reform in the public sector and (proposed) in the private sector.

• The next IR35 Forum meeting is scheduled for August 2nd 2018.