What can we conclude from HMRC’s refusal to publish IR35 data and its increased emphasis that its framework introduced during May 2012 is a pilot? Could it be that the taxman is adopting the approach that ‘if the results are poor, let’s call it a pilot’?
HMRC has consistently failed to publish any data on the performance of the new IR35 framework it introduced during May 2012, despite freedom of information requests we have submitted and requests by members of the IR35 Forum.
And, after the phrase ‘pilot’ disappeared from HMRC guidance and forum minutes between May 2012 and January 2013, it suddenly made a reappearance in the April 2013 meeting, and then again in August 2013. Possibly when the initial and subsequent performance data started to be gathered internally?
The minutes from the August 2013 forum were also notable because:
- HMRC confirmed that it was not measuring key data, such as whether the business entity tests (BETS) were being used, apart from the number of downloads
- The forum “agreed that is it difficult to see a clear way forward without any meaningful data/statistics on the tests”
- An unattributed note (paragraph 30) claimed that two year’s worth of data is required before any meaningful conclusions can be drawn
- HMRC issued a framework for the review of its new IR35 without making a commitment to release IR35 data
- Suddenly, according to HMRC, not enough contractors know about IR35, so a marketing campaign is required to educate them.
Based on the audited readership figures of ContractorCalculator’s IR35 guides, the use of our free Online IR35 Test and our online interactive IR35 calculator, saying contractors don’t know about IR35 is nonsense. The first question on the lips of any new contractor nowadays is, ‘Will IR35 affect me?’. So this is HMRC trying to shift attention away from its refusal to publish any data.
As is the framework document, which to be fair asks some sensible questions, but will still be ineffective without IR35 performance data, as the non-HMRC members of the forum clearly pointed out. How can you review the performance of a process without performance data?
The only reasonable conclusions we can draw from HMRC’s refusal to publish any data is that it is bad news. The new framework, which has cost HMRC, contractors and the industry huge resources to create and implement, is not working.
What has not changed is IR35. It remains as unenforceable as ever, because the BETS might increase the risk of an investigation, but contractors are better equipped to fight these than ever before. After all, there is well-documented IR35 best practice, affordable insurance, effective contract reviews and a mature service industry behind them.
For HMRC, it seems, its approach to suspected failure is: ‘If the results are bad, then let’s call it a pilot.’