It is the first occasion the IR35 Forum has met since last July as its scheduled October meeting had been postponed. This is despite a fairly active summer and winter in IR35 terms with the media scandal of senior public sector workers and the Government's reaction by clamping down on the arrangements for using contractors within the public sector and the controversial 'controlling persons' and then 'office holders' proposals. (See Shout99's News on IR35 section).
After a six month gap, the IR35 Forum finally met in January this year with a number of items on the agenda and some outstanding feedback and follow ups from the last meeting.
Review of HMRC’s new approach to IR35
HMRC confirmed that the three new specialist compliance teams had made good progress and were on target to increase coverage to the intended 230 cases.
There was some discussion about communication problems. Forum members agreed to give HMRC examples where there had been problems so that HMRC could deal with specific issues rather than simply general principles. For example, the postal service and delays came in for some criticism, but in answer to suggestions that it should use email, HMRC said that it sensitive about communication by email as it is not a secure method of communication, although it would consider it in the IR35 context.
Contracts and IR35
Forum members were concerned that some cases HMRC were asking for copies of ‘upper contacts’ which led to concerns that they might make early contact with the client and possibly jeopardise the relationship with the contractor. HMRC said that they will always in the first instance try to get information from the person under enquiry. Nevertheless, they reserved the right to approach third parties if they considered it was necessary.
The controlling persons provisions which then transformed into the office holders clause, signalled the first change to IR35 legislation in over a decade. In a reaction to the afore mentioned scandal involving senior public sector workers operating through their own companies, the Government announced in the Autumn Statement its intention to bring forward a change which would mean that freelancers who are office holders or hold integral senior positions in an organisation will be caught under IR35. (See: First legal change to IR35 stengthens its provisions Dec 2012)
Since then the Forum members, who represent contractors, accountants and other sectors of the freelancing market, have sought clarity on some issues. However, the minutes of the January Forum meeting showed that the lead policy official was unable to attend the Forum, so it was not possible to respond to the points raised in detail. However, HMRC said it would consider carefully all comments to ensure that the amendment did not result in unintended consequences. On one particular point, HMRC confirmed that it was not the intention that the term 'office holder' applied to the 'office holder' of their own company.
There was also some discussion as to the position of company secretary being caught by the amendment and where a company is appointed to office holder positions, such as company secretary positions. HMRC advised that in such cases they would look at the specifics of the arrangement.
One Forum member complained about the type of language used in the Autumn Statement, saying words like ‘beyond doubt’ were associated with avoidance schemes. They pointed out that office holders were already included in current legislation and that this tone of phrase could cause unnecessary offence. HMRC said that’none was intended, however the taxation position of an office holder is not a universally held view with there being disjoint between tax and National Insurance, and also pointed out that IR35 was after all anti-avoidance legislation.’
In the past there has been some complaints about the way Government Departments and other public bodies were satisfying themselves about the terms of engagement of contractors following a requirement that they do due diligence to check their IR35 status. (See: HMRC's business tests at heart of new rules for contractors, Shout99, Sept 2012).
Now it appears that one unnamed public sector body has been asking contractors for a non existant certificate from HMRC to show they were outside of IR35. It was pointed out at the Forum that there is no requirement for such a certificate and the most HMRC could provide would be an opinion on a contract, which could be disputed.
Business entity tests
At the last meeting of the IR35 Forum, HMRC agreed to provide feedback on the Business Entity Tests at the next meeting. However, this did not happen as HMRC advised that there was some question as to whether this data is available and said that they will check this and come back to the Forum at a later date.
At the end of the meeting, HMRC confirmed that all IR35 guidance is currently under review, stressing this was a refresh rather than a rewrite.
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Susie Hughes © Shout99 2013