In HMRC

Shout99, a news and information outlet for contracting professionals, criticised claims by a senior HMRC official that, before controversial IR35 reforms took place in April, public sector contractors wrongly categorised themselves as outside the tax regulations in 90 percent of cases.

Writing for the HR website People Management, Revenue tax assurance commissioner and DG for customer strategy and tax design, Jim Harra, insisted that the new IR35 reforms were necessary and effective.

He also accused contracting professionals of paying less tax than they owe by applying IR35 rules incorrectly, thereby depriving the economy of “hundreds of millions of pounds for schools, hospitals and other public services.”

Mr Harra denounced media outlets condemning the reforms, and insisted they were spreading “a great deal of misinformation.” These media criticisms drew attention to the loss of contracting talent from the public sector as a consequence of the changes. Mr Harra insisted that there had been no exodus of contractors from the sector and denied that public sector bodies had been ruling every job inside the intermediary rules as a matter of course. Rather, he maintained, contractors simply “come and go” as the nature of the market was “naturally fluid.” Mr Harra also insisted that there had been no recruitment gaps caused by the reforms.

Finally, he described the HMRC’s disputed online tool – now called “check employment status for tax” (CEST) – as accurate and reliable, delivering a conclusive result in 85 percent of cases.

Responding to the article, Shout99 journalist Susie Hughes writes:

“His rhetoric had a familiar ring to it as he uses the same emotive and political arguments which originally emerged nearly two decades ago from the left-wing Treasury Ministers who sought to introduce the tax – claiming that contractors were denying the country money which could be used for hospitals and schools.”

Another online contractor information resource, ContractorUK, emphasised that Mr Harra’s assertions contradicted information and feedback it had received from the public sector itself and from recruitment consultancies struggling to fill public sector contracting roles. ContractorUK’s information was that any potential increase in tax receipts arising from IR35 reforms were being offset by delayed public sector projects and rising costs of delivery and skills, none of which was discussed in Mr Harra’s article.

Contractor Mike Gibson responded to Harra’s assertions by emphasising that the most unjust fault with IR35 lay in the failure to link employment status with tax status. He said:

“In a fair and democratic society, how can it be right that the government can regard a contractor as an employee for taxation purposes but not grant them any of the employment rights of an employee.

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