HMRC redefining IR35 'blanketing' shows it's on the back foot

Having already succeeded at using legal means to tackle the NHS’s regulator over ‘blanket’ IR35 decisions, we’re probably better-positioned than most to call out HMRC for moving the goalposts on across-the-board status determinations for contractors, writes Dr Iain Campbell, general-secretary of the IHPA.

Almost needless to say, and in line with our view on what NHS Improvement did but later conceded to us was wrong, HMRC’s attempt to normalise ‘blanketing,’ as it tried to do at the May IR35 Forum meeting, is just plain wrong.

As the tax authority well knows, individual representations of status by PSCs should be a requirement and public sector bodies would not be exercising ‘reasonable care’ by blanket assessing in such a way.

Such ‘role-based’ blanket assessments fail to take into account how the contractors' businesses are structured or run; the unique financial risks of individual contractors and the willingness of individual contractors to be engaged in certain ways. What courts have said matters, is the actual intentions, and actions of the party -- the working reality, plus the facts of the agreement.

And fundamentally, HMRC cannot judge the intent of both parties before the identity of one of the parties its even known! As mentioned at the outset, we have previously taken NHS Improvement through the pre-action protocol of judicial review on this exact point of unlawful blanketing -- and forced them to concede.

Unfortunately, evidence we have obtained from across the whole public sector is increasingly leading us to the conclusion that HMRC itself may be at the root of engagers’ willingness to initiate, and run with, across-the-board, universal IR35 status determinations. The very same decisions which a QC has warned warrants scrutiny by a panel of MPs, no less.

This evidence has been reaching us since (and before) HMRC belatedly published its interpretation of Mutuality of Obligations. This interpretation of MOO is legally flawed in our view, and in the view of many others. The Revenue is attempting to hoodwink by erroneously employing the contract law definition, in place of the employment law definition.

As evidence grows that the department is contributing to -- or even potentially playing a central role in, the lawlessness we’ve seen since the April 2017 IR35 framework was introduced, HMRC is potentially leaving itself wide open to the possibility of pan-public sector legal challenge. 

We have been calling for evidence from across the public sector and been uncovering disturbingly consistent patterns across many industries. And if you’re reading this with evidence of IR35 ‘blanketing’ – you know exactly what it is despite the reframing by HMRC – please forward it to [email protected].

And if you’re feeling battle-weary, remember the following. The many submissions against unfair, unreasonably-arrived-at IR35 blanketing have already forced HMRC to adopt an untenable position, recorded in section 5 of the IR35 Forum Minutes. When they’re forced (as they were at the May meeting) to attempt to redefine blanketing as the only way to get out of their denial about the wrong approach public sector bodies are taking, you have them on the back foot.