'Clients shouldn’t have to do what HMRC can’t -- get IR35 right'

A second adviser to contractors has declared that businesses shouldn’t be forced to get right what even the tax authority gets wrong -- the IR35 status of PSCs.

Qdos Contractor says that HMRC found out in the MDCM case just how “complicated” IR35 is, when it erred by deciding that Mark Daniels was inside IR35 due to his working practices.

A consultation proposing that the same process of having to decide IR35 status should shift to enterprises, rather than HMRC or PSCs, would therefore be unwise, the advisory firm warns.

“IR35…is complicated to the extent that HMRC themselves can’t correctly identify whether a contractor belongs inside or outside”, says the firm’s chief executive Seb Maley.

"[So] how are millions of private sector businesses expected to? This case is yet another indicator that speculated moves to extend IR35 reform to the private sector would be unwise.”

He echoed three industry groups’ alerts that the worst version of private sector IR35 reform would be a straight superimposition of the public sector’s April 2017 framework.

One of those bodies, IPSE, was the first to say that making business liable for deciding a tax issue which not even the tax authority can correctly decide is, at the least, ‘unfair.’

The body wants further IR35 reform stopped. And Qdos, an expert on IR35 agrees: “The [MDCM] case shows exactly why speculated private sector reform should be avoided,” it said.

“You only need to look at the public sector, and the BBC’s and the NHS’s reported handling of IR35, to see that many organisations aren’t equipped to make accurate status decisions.”

Those decisions have been implied by a barrister to be so inaccurate that they actually deserve examination by MPs on a Commons Select Committee.

That committee last month heard criticisms from BBC presenters of the CEST tool, generically known as the IR35 digital tool. Mr Maley is also among the tool's critics.

“Regardless of the fact [Mark Daniels’] working arrangement took place before the release of CEST, that HMRC lost the case casts further doubt on the reliability of the tool,” he said.

“After all HMRC built the test, so who’s to say whether IR35 decisions made by CEST are accurate or would stand up in court? IR35 is complex and HMRC must understand this”.