Public Accounts Committee, HMRC and Clarification on IR35 ‘Progress’

This week, Jim Harra, CEO at HMRC, was invited to give evidence to the PAC on a range of topics and first up was IR35. The Parliament Live TV recording can be seen here and the IR35 elements are at the front end of the recording, lasting about 25 minutes.

The line of questioning appears to be polite and not too penetrating but during the course of the session, certain assertions were made, which appear to have some room for error attached to them. If this is symptomatic of the way that relevant information is shared within HMRC, those of us covered by the regulations in the way that we work should be justifiably still concerned about the way these rules are being applied and enforced.

Freelance Informer states the following as described by Dave Chaplin, CEO of Contractor Calculator, as being suspect statistics and positions being taken:

• “Harra claims most litigation does not go past the FTT. HMRC has appealed every single case they have lost, including the last six.
• Harra also claims that “in recent years” HMRC has won 70% of cases. Since the courts changed from special commissioners to FTT/UT, the scores are 64% taxpayers, and 36% HMRC. Since HMRC started fielding counsel, the scores are 52% taxpayers, and 48% HMRC.
• Harra claims that most cases are represented for HMRC by HMRC caseworkers. However, of the last 22 hearings, HMRC has used barristers in all except one. “

So, the question remains where the line should be drawn between sensible, consistent application of the regulations and an approach that borders on harassment. Surely any clear, consistently applied regulation does not require the hounding of individuals through various layers of tribunals and the courts, up to and including the Supreme Court?

Claiming that most of the current tribunal/court cases refer back to pre 2017/21 regulation changes and at the same time saying that the regulations are clear and have been consistently applied, and HMRC have applied the rulings of the courts is not true. To suggest the CEST tool is current and takes account of these changes is patently not true. Just see Mutuality issues.

And by admission, the estimate is that somewhere around 100-150,000 people have moved back into permanent employment in recent times (the inference is that this is a direct result of the regulatory changes) is not the most ringing endorsement of IR35. Unless you have designed it to press people back into the world of contracts of employment of course, thus undermining the whole ‘flexible UK workforce’ concept.

Members should make sure they are well acquainted with what is required to ensure their tax position is clear through their contracting and the way that they work with a client.