Law firm condemns ‘IR35 scaremongering’

A recruitment law firm has hit out at what it calls “IR35 scaremongering,” by busting a number of myths that it says are “emanating from the contractor community.”

The first of the four “misleading” sentiments is that because CEST is widely considered to be flawed, that hirers and agencies should not use it or that it cannot help them, says Lawspeed.

“It is difficult for HMRC to argue against a finding of the tool since HMRC states that it will stand by the outcome provided that information is correctly input,” the firm says.

“For this reason, hirers and agencies are best advised to use the CEST tool to check wherever they believe IR35 may not apply, such as where there is a genuine project.”

'Not correct'

The second myth is that ahead of private sector IR35 reform, making tax deductions where an existing off-payroll contract is caught on April 5th 2020 may amount to a breach of contract.

“This is not correct unless the contract terms specifically exclude any kind of deduction for tax, and I have never seen such a provision,” said Lawspeed’s Adrian Marlowe.

Also false, he says, is the belief that imposing the new IR35 rules on an underway contract would be problematic, as deciding if IR35 applies must be done prior to the contract’s end.

'Alive'

“The existing legislation allowed for IR35 decisions to be made after application of the new rules and before the next payment is made where a contract was already running.

“Since the issue was alive and addressed at the time of the public sector rules there is no reason to believe it will not be treated similarly under rules to be introduced in April 2020.”

The lawyer added that the fourth “false news” item is that saying employment rights claims will follow ‘inside IR35’decisions -- a point headed off on ContractorUK only this week.

'Real-world'

“The idea that a company contractor has actual employment rights because the company arrangement is subject to IR35 tax rules does not live in the real world,” Lawspeed said.

The firm explained that it has decided to bust the four myths as a way to combat ‘IR35 scaremongering,’ which it warns will “lead to a breakdown in trust”.

In a statement, it said: “It is perfectly commendable to challenge the government’s plans, [but] the correct way to do so is to point to real practical problems rather than publish material that is misleading and incorrect. There is no room for scaremongering”.