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Contractors still in the dark about IR35 enquiries: IR35 Forum minutes

Contractors remain in the dark about the effectiveness of the new IR35 framework and the business entity tests (BETs) introduced by HMRC in May 2012.

“The minutes from August’s IR35 Forum meeting show that yet another IR35 Forum passed with virtually no performance data being published by HMRC,” says ContractorCalculator CEO Dave Chaplin. “The forum was set up to involve the industry in simplifying contractor taxation, but how can anyone judge progress, with such a lack of transparency from the taxman?”

According to the minutes, “the only data [HMRC] had in regard to the BETS is the number of times they have been downloaded”. HMRC confirmed that during an IR35 investigation “customers are not specifically asked whether or not they have used the BETs”, and that “there is no way at present of capturing this information”.

August’s minutes also show that the forum “agreed that is it difficult to see a clear way forward without any meaningful data/statistics on the tests”. An unattributed note in the minutes highlights that “to obtain meaningful data a minimum of two years’ compliance cycle would be needed”.

Chaplin is unimpressed: “HMRC stonewalled our May 2013 freedom of information (FOI) request about the new framework’s performance data, claiming that the figures would be published according to its own schedule.

“And HMRC continues to hide behind excuses, refusing to divulge data that can help contractors better understand and manage their IR35 risk.”

The only evidence of the effectiveness of the new IR35 framework came in the form of HMRC data on its contracts review service (CRS) helpline. This showed that between April 2012 and March 2013, there have been 80 requests for information with only 10 written opinions provided.

Out of the remaining 70, over which HMRC said it is “unable to give an opinion as yet”, the main reasons cited for the lack of progress include there being an issue with the contract and that the request is still a work in progress.

More positively, by using three focussed IR35 compliance teams, it seems that reviews are being shut down quickly when it becomes clear that the contractor is outside IR35. The minutes show that “enquiries for this reason are happening within one and six weeks of the enquiry being initiated”.

Another topic that dominated the proceedings was the perception by HMRC and some external IR35 Forum members that IR35 is little known to contractors and their accountants outside of specialist circles.

According to Chaplin, that’s far from being the case: “‘Will I be affected by IR35?’ is the first question every new contractor asks, and the number of visitors taking ContractorCalculator’s Free Online IR35 Test and reading our online guides demonstrates that IR35 is widely recognised.”

Chaplin isn’t going to let matters rest: “We have written again to HMRC requesting data about how the new framework has performed since its introduction in May 2012.

“If we are stonewalled again, that suggests that the taxman has something to hide. We will be contacting the HMRC FOI Team and the Information Commissioner to secure data which should have been published months ago.”

Published: 16 October 2013

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