When does an ‘Untruth’ get Labelled what it is – A Lie? And What are the Consequences?

Let’s start with a couple of definitions:

A Lie: to say something that is not true in order to deceive. (Cambridge Dictionary)

Legal Definition: the misrepresentation of one or more facts in order to gain a benefit or harm another person, where the actor knows or should know that the misrepresentation will be relied upon by another person.

The legal term for lying in the UK is Perjury

Perjury is a criminal offence and can lead to serious consequences. It is triable only on indictment, which means that it can only be heard at the Crown Court.

Keeping this in mind, I have been contemplating recent evidence given to the Public Accounts Committee (PAC) of the House of Commons, chaired by Dame Meg Hillier MP, plus a Freedom of Information Act request from Dave Chaplin of Contractor Calculator. In particular, the view below is a response to the PAC report reviewing HMRC performance, 2022/23 – the 16^th report of the 2023/24 session.

The committee report identifies a lot of concern over the way that HMRC has been operating with the Off Payroll Regulations, otherwise known as IR35. It uses fairly parliamentary language but in the end is saying that the way HMRC are going about things is less than helpful, poor value for money, bordering on misguided.

As you probably know dear reader, the law of the land develops through the establishment of precedent, as laid down by the courts and this has been happening on a fairly regular basis for many years now with respect to the Off Payroll Regulations.

Some years ago, Jim Harra, Permanent Secretary and Chief Executive, HMRC, indicated that the on line tool for determining whether a piece of work was ‘inside’ or ‘outside’ IR35 was based on the law and would be developed as precedent changed. So the CEST tool (Check Employment Status for Tax) therefore would reasonably be expected to be updated on this basis. The above FoI request to HMRC response revealed that there have been no updates for five years and counting. This is contrary to a specific statement to the PAC, given as evidence.

The PAC was also concerned about the amount of public money and time being used to police the regulations, whilst at the same time allowing or even enabling criminal activity to take place without challenge. The cost effectiveness of the process as a whole was being significantly questioned.

Specific points were made by HMRC on how they were applying the regulations (bear in mind HMRC are effectively police, prosecutor and even jury for much of the process). Three of these that Mr Harra made are:

• It was claimed that in most cases, barristers were not used by HMRC in IR35 tax hearings. In the last 28 ‘outings’, HMRC have had legal counsel at 25 of them. Do we count this as a lie then?
• It was claimed HMRC had won 70% of tribunal cases. In spite of the first point, the actual situation since 2017 is that these turn out about half and half. A lie?
• It was claimed that the CEST tool is always reviewed after tribunal rulings. Previously Mr. Harra had been more definitive to the PAC in 2019 about CEST being “continually updated” and this being “..an ongoing and continual process.” As mentioned above, the FoI request demonstrates unequivocally that this is not true. That is, this is a lie.

We ought to consider the basis on which the CEST tool works. It is, essentially a decision tree, requiring Yes/No answers to the questions it asks the user. It is really quite a simple model. HMRC use this to ‘guide’ the user to a result for inside or outside IR35 but the law is highly nuanced and has become progressively more so over the years. The CEST tool has not changed, evolved or transformed at all in this time. It is therefore an ineffective tool to be used and the IIM maintains its view that it is completely unfit for purpose.

The IIM recommends using an alternative approach. You can obtain your own ‘feel’ from using the questionnaire we supply on a members-only basis on the website and/or use one of the well-publicised services that do maintain an up-to-date view of the legal landscape. We partner with Qdos who are skilled in the art.

In summary, we have evidence being given to a very important parliamentary committee that reviews the work of HMRC, that is flawed fundamentally. It covers the range of financial regulations and in the case of the Off Payroll Regs, the committee is being given a false view, over an extended period. Just thinking about IR35 regs alone, about 4 million people in the UK are affected by them. This includes all interims.

Now, just think what might happen if you adopted this kind of approach in client assignment review meetings. What price your professional reputation? Legal proceedings? Testing your professional indemnity insurance terms? Would you get to work again? As a member, would you be brought to account for breaking the code of conduct you have signed up to?

Does it feel a bit like the Post Office scandal? What price integrity, honesty, openness?

Just saying…..