back to article UK tax collector won't probe businesses for compliance with IR35 rules unless there's reason to suspect naughtiness

An IR35 snooper squad sniffing out contractors won't be coming to a town near you anytime soon unless there is a strong reason to suspect "criminal" behaviour. So said British tax collection agency Her Majesty's Revenue and Customs (HMRC) as it outlined the way that the tax reforms will work and be policed when they come into …

  1. alain williams Silver badge

    "Nice business that you have there ...

    it would be a pity if something happened to it". Especially since the rules as explained by CEST are vague.

    1. Anonymous Coward
      Anonymous Coward

      Re: "Nice business that you have there ...

      The rules in cest are (deliberately) vague, but the law is clear cut - if there is no mutuality of obligation (MOO), there is no employment and the engagement is outside of IR35. The law on IR35 hasn't changed, only who is responsible. I hope that HMRC chase up those companies who, against the law, apply a blanket determination to save their own backsides.

      What will be amusing will be the contractor who, when a contract ends, points out that as inside IR35, there must be MOO And they legally need to provide more work....

      1. Mike 137 Silver badge

        "if there is no mutuality of obligation ..."

        In appeal TC07594 (Northern Lights Solutions Ltd and the Commissioners for Her Majesty's Revenue and Customs) (which was denied) Judge Ian Hyde stated 21. In Jensal Software v HMRC [2018] UK FTT 454 at paragraph 61 Judge Dean helpfully summarised the factors that might usefully be considered;

        “From the authorities I derive the following as relevant factors:

        (i) Mutuality of obligation to perform personally work offered and to pay remuneration is the “irreducible minimum ... necessary to create a contract of service” (see Carmichael v National Power Plc [1999] 1 WLR 2042);.

        TC07594 continued

        112. HMRC argued that there was a mutuality of obligation in the current circumstances including an expectation that the work would be available during the relevant contract periods. It was irrelevant that there was no expectation of further work beyond completion of a contract, the situation being no different to an employee on a fixed term contract. Indeed, even if the contract was terminable on either side at will there is mutuality of obligation citing Elias LJ in Quashie v Stringfellows Restaurant Ltd [2012] EWCA Civ 1735.

        It would appear the "mutuality is a highly moveable feast that can be readily interpreted to the advantage of HMRC. Even an itinerant window cleaner could be considered an employee of every householder that uses their service.

  2. TimMaher Silver badge
    Facepalm

    Customers

    Why do these people keep referring to us as 'customer's?

    If I am a customer I am massively disappointed with the service and I want my money back.

    1. Doctor Syntax Silver badge

      Re: Customers

      Or take your business elsewhere.

      Between them those are two test sufficient to decide whether "customer" is the correct term or that something more appropriate should be used - say "victim" or "prey".

  3. Doctor Syntax Silver badge

    I suppose not carrying out investigations avoids any risk of discovering that CEST had charged too much.

  4. Dave 15 Silver badge

    When

    When are they going to lamp down on the likes of Amazon and Starbucks, or even MPs? They all dodge tax with legal loop holes. If I go a contracting i put up with a lack of support if there is no work, a lack of paid holiday, sick pay and loads of benefits in order to provide the flexible workforce apparently required. Now HMRC want to take from me tax as if I had a cushy number with redundancy protection, regular hours, paid holiday etc etc etc Guess what, I won't do it, then those companies that need the flexibility will have to turn to foreigners and money will leave the UK never to return, I will be unemployed and a burden to the state. In all as said before I'll thought out, targeting the wrong people and a stupid stupid stupid stupid idea bought forth by morons and Muppets who think it's ok to claim for living away for a 5 year 'contract' when they are an MP but want to screw not just the little guy but industry as well. Anuses the lot of them

    1. Franco Silver badge

      Re: When

      I've made this point many times here in regard to IR35.

      Quite simply, they can't. HMRC don't have the legal muscle to go after the big corporations, and in many cases it's not just UK law but EU law that applies. HMRC of course have to be seen to be doing something about tax dodging (their term, not mine) so go after contractors, many of whom don't have the legal muscle to fight HMRC. Unfortunately for them they started going after broadcasters, who are a nice juicy target, but in a lot of cases DO have the legal muscle to fight HMRC and have given them several bloody noses and also exposed just how much of a grey area IR35 law really is.

      As you said much of the work contractors do in the UK will end up going to the offshore outsourcing companies, who will charge more but pay less tax and pay their employees even less, all in return for a poorer standard of work being returned.

      1. This post has been deleted by its author

    2. Anonymous Coward
      Anonymous Coward

      Re: When

      > If I go a contracting i put up with a lack of support if there is no work, a lack of paid holiday, sick pay and loads of benefits in order to provide the flexible workforce apparently required.

      If, by "put up with", you mean "charge significantly more because of", then yes.

    3. This post has been deleted by its author

  5. Steve Button Silver badge

    Drop it!

    Presumably as the pandemic is still in full swing, they will be announcing yet another delay to this policy. That was the reason last year, so I guess this will happen again at the last minute again this year. Really they should just get rid of it, it's a terrible policy.

    1. Anonymous Coward
      Anonymous Coward

      Re: Drop it!

      Rules like IR35 rarely originate from from the political party in power. There are no major headlines to be won, nor a meaningful boost to the government coffers. If IR35 is scrapped, it would be replaced with something else.

      The seeds of IR35 came from the civil service in order to ensure the need for more staff to administer it. This is the same reasoning as why the OTS (Office for Tax Simplification) would never suggest anything to actually simplify taxation, or if they did the proposal would be shot down by other departments.

      Need to keep those civil service empires growing. Yes Minister and Yes Prime Minister were documentaries.

      1. Dave 15 Silver badge

        Re: Drop it!

        Yes minister

  6. jmch Silver badge
    Facepalm

    "Trust Us"

    The gist of the announcement seems to be "Trust us, whatever is in teh wording of the law, we will be implementing / policing it reasonably".

    Yeah, right!

    1. Dan 55 Silver badge

      Re: "Trust Us"

      "For my friends everything, for my enemies the law."

  7. xyz

    As a former shaftee...

    Who had 13.5k lifted out of his back pocket even though I was working from home , I think the bit that pissed me off the most was getting a call from hmrc customer services so I could rate their performance and customer experience. I went apeshit.

    1. Anonymous Coward
      Anonymous Coward

      Re: As a former shaftee...

      > getting a call from hmrc customer services so I could rate their performance and customer experience

      In my corner of the woods each company has its designated tax office employee. If there are any questions from their side she will write or phone. If we have any questions we can rock up at their office, send her an email or give her a call. It's all very civilised and over time as they get to know you they can tell who makes mistakes and who tries to pull a fast one.

      I won't say it makes filing the taxes a pleasure but at least you get the feeling that we're both on the same side.

  8. Kevin Fairhurst

    What's that smell?

    From the article...

    "We have also committed that we will not use information acquired as a result of the changes to the off-payroll working rules to open a new compliance enquiry into returns for tax years before 2021 to 2022, unless there is reason to suspect fraud or criminal behaviour."

    So give it about three months before the following letters start getting sent out...

    "After ten years of working at Bob's Bolts Ltd where you have self-certified as outside IR35, Bob now want's to retain your specialist skills but inside IR35. Therefore we think you fraudulently self-certified as outside IR35 for the previous ten years and we are going to open an investigation into this fraud!"

    1. fix

      Re: What's that smell?

      If you've been providing services to Bob's Bolts Ltd for 10 years straight then it's a pretty long stretch to say you're really a contractor.

      1. katrinab Silver badge
        Meh

        Re: What's that smell?

        Tesco have been supplying services to me for about the past 25 years since I became responsible for buying my own food. Do I need to I need to start making IR35 deductions from my payments to them?

        1. fix

          Re: What's that smell?

          No, Tesco's have been supplying goods to you (and millions of others), not services, totally different ball game.

          1. David Neil

            Re: What's that smell?

            What about my power company then, or Broadband provider.

            It's not as simple as provider of services

      2. Dave 15 Silver badge

        Re: What's that smell?

        Depends on things like paid holiday and sick, other customers etc. I don't employ my local publican if i have been using his pub for 10 years

      3. Roopee
        Headmaster

        Re: What's that smell?

        Not necessarily - when I was a contractor I supplied my services through my Ltd to a school for 10 years, outside of IR35 - the difference is that I also supplied several other schools, a half day or day a week at each.

        I was also free to determine almost everything about the way I performed my job, and I supplied my own tools etc.

  9. DevOpsTimothyC Bronze badge

    Reason to suspect naughtiness

    The only problem with the "reason to suspect naughtiness" is that their reason to suspect naughtiness includes "You've switched from outside IR35 to Inside IR35".

    When you add that to the law changing meaning many clients who have been happy that you were outside, but now that the liability is switching to them they are only offering inside IR35 contract to protect their liability.

  10. ScottishYorkshireMan

    "HMRC wants to clamp down on what it sees as freelancers dodging tax." No mention of the politicians though. They get their own helpline and even when a politician is found to be in the mush, Hail Mary's Recovery Company does nothing so they don't embarass the politician. Tax is for the plebs to pay.

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