Contractors have learned from the latest IR35 Forum minutes from 15 December 2015 that HMRC is still evaluating the responses to the IR35 discussion document consultation response before making further changes.
However, concern has been expressed that these latest minutes do not include confirmation from HMRC that there will be no proposed changes made to IR35 within the Finance Act 2016. This would have ensured that no amendments to the legislation would take place in time for the 2016/17 tax year.
“We’d been led to believe that HMRC is planning no changes to IR35 until 2017. So, this is slightly concerning but perhaps not surprising” notes ContractorCalculator CEO Dave Chaplin. “We’ll be following-up with HMRC and Forum members to establish what HMRC did commit to.”
A more definite conclusion was drawn regarding the administration of current IR35 rules, as HMRC provided an update on plans to improve its Employment Status Indicator (ESI) tool and encouraged the involvement of stakeholders in its development.
HMRC is currently working on plans to develop an IR35-specific ESI tool. Once completed, the existing Contract Review Service (CRS) will be aligned with the wider HMRC approach to providing clearances.
Forum members highlighted that trust of the tool amongst users poses the biggest challenge, whilst achieving transparency with regards to the way questions are worded is also of utmost importance.
HMRC also confirmed that a Cross-Government Working Group for Employment Status will be established. The move comes after the Office of Tax Simplification’s (OTS) March 2015 report on Employment Status and tax highlighted the need for a common definition of employment status. The announcement of the Working Group was welcomed by the Forum, who highlighted the importance of broad consultation.
Meanwhile, Forum members raised issue with the changes made to travel and subsistence (T&S) tax relief for umbrella contractors and personal service company (PSC) contractors caught by IR35.
Concerns were raised that an employment business may disagree on whether a PSC is subject to IR35. Members also pointed out issues over due diligence and the possibility that those unfamiliar with the Employment Income Manual might be caught out using the wrong rules.
In response, HMRC claimed it would provide guidance to give greater clarity to those affected. Contractors have little time left to make comments on the legislation, the deadline for which closes on 3 February 2016.
The next IR35 Forum meeting is scheduled for late April/ early May 2016.