HMRC claim IR35 tool hits targets despite FOI revealing no data is held to back claim

HMRC claims it holds absolutely no record of the results contractors have received when using its IR35 assessment tool, following a Freedom of Information (FOI) request by ContractorCalculator, despite them claiming in a recent letter to us that it was hitting set targets of 80-90%.

Would the taxman genuinely neglect to monitor something so important? Or is HMRC just hiding the fact that it isn’t doing a very good job at all?

Or, is the taxman stonewalling us after we publicly exposed the shortcomings of its IR35 tool? Either way, the response is not only less than convincing – it’s bizarre.

Why can’t HMRC back up its IR35 test claims?

In April 2017, we wrote to Kirsty Blackman MP to express our concerns about the tool and share the results from our analysis that found:

  • HMRC’s IR35 tool is unable to determine the status of 24% of contractors
  • 29% of contractors who passed HMRC’s IR35 tool should fail IR35

Ms Blackman shared our information with the Financial Secretary to the Treasury and we received a three-page letter in response. It was claimed that the tool had been used more than 186,000 times, and was able to provide an answer in 80%-90% of cases.

Curious about these figures, we submitted an FOI request to HMRC to find out:

  1. The number of times the test had been taken
  2. The number of results in each category – inside IR35, outside IR35, and ‘unable to determine’

In its response, HMRC indicated that test usage figures had almost doubled to 350,000, yet curiously claimed it didn’t hold any data concerning the actual test results.

It begs the question, how can HMRC claim that the tool provides a certain outcome 80%-90% of the time on the one hand, but then say that it doesn’t record the results? You simply can’t have one figure without the other.

HMRC’s suspect statistics – haven’t we been here before?

When HMRC released its tool in March, it said it would undergo continual development, and it has done – but surely you would record the results so you had something to go on, right? How else can the taxman expect to improve the tool?

One advantage of not recording anything is that no-one - including ContractorCalculator via FOI requests - can access the data. But we’ll make some more enquiries and let you know what happens.

Releasing questionable statistics is hardly uncharted territory for the taxman. HMRC has been justifying its attack on the contracting sector by maintaining that 90% of those that should be complying with IR35, aren’t – and we’re still awaiting proof of that claim.

HMRC’s IR35 tool – the figures don’t add up

Our own analysis of HMRC’s IR35 tool contrasts sharply with the taxman’s claims, and HMRC’s figures don’t add up. Since day one, HMRC has buried its head in the sand and ignored the issues surrounding its IR35 tool, despite our warnings and those by other experts.

Is HMRC stonewalling us all simply to save itself any further embarrassment after we put its tool to the test? Unfortunately, until we find some absolutely irrefutable proof, we’ll have to chalk this one up as ‘unable to determine’.

Published: Thursday, June 22, 2017

© 2017 All rights reserved. Reproduction in whole or in part without permission is prohibited. Please see our copyright notice.

IPSE