IR35 Forum: December 2017 meeting at-a-glance

The minutes of a meeting from the IR35 Forum in December 2017 have now been published by HMRC, in early February 2018.

The meeting was the first of its kind since the Autumn Budget in November, when the government vowed to consult on reforming IR35 in the private sector.

Introduction

• HMRC started the meeting by reproducing Autumn Budget 2017’s promise to consult on reforming IR35 in the private sector, potentially by extending the April 2017 off-payroll rules.
• Forum members were told of HMRC’s “immediate need” to fix non-compliance with IR35, which it estimated (based on the public sector reforms) to cost the Exchequer £1.2bn by 2022/23.

Forum members’ concerns

• A 12-point list of concerns around existing IR35 reform, introduced in April, was handed to HMRC.
• Asked about 'blanket' decisions, HMRC said: “Applying a decision to a group of workers with the same role, terms and contractual conditions can be appropriate.”
• To clarify though, HMRC specified that it would not be appropriate for a public sector body to rule all engagements in or out irrespective of the contractual terms and actual working arrangements.
• The idea from a member of ‘naming and shaming’ avoidance scheme promoters (made more popular by the April ’17 framework) was turned down by HMRC.

Incoming materials from HMRC

• For the New Year of 2018, “independent” research will be published on the impact that the April framework has had. It will include information about pay rates across the public sector since the reforms.
• Also seemingly late (“second half of January”), is an in-depth explanation from HMRC as to why CEST fails to test for MOO. In short though, HMRC is expected to say MOO is already assumed as present in CEST users' working practices.
• HMRC was sympathetic to concerns that the ‘outsourced service exemption’ example in its guidance is unclear and would be exploited in a potential private sector roll-out, so it will hone the example.

The Forum itself

• The CBI will become an IR35 Forum member, partly to input on concerns that private sector reform will be more difficult as its supply chains are more complex than those of the state sector.
• In reply to a member who asked what the “criteria for success” in the public sector was, HMRC declined to be drawn, but said extending the April ’17 rules was only one option to be looked at in the forthcoming consultation.
• The forum will enlist former members, such as the FSB and IoD, but will overall become a subgroup of the Employers Payroll Group. An external member will be a joint-chair, alongside the HMRC chair.

Further actions HMRC will take

• The Revenue will work with members to develop guidance products for businesses on working with umbrella companies. This will help confirm the make-up of compliant (and non-compliant) brollies.
• Guidance that HMRC has made available on reclaiming NICs where the IR35 status decision is challenged in the self-assessment return is to be reviewed.
• Tax staff will also review the impact of the off-payroll framework on individuals holding ‘Entrepreneur Immigration Visas’ (for the self-employed) and are determined as inside IR35. Currently, there is no HMRC guidance for people in such circumstances.