In HMRC

Dave Chaplin, the CEO of ContractorCalculator, the online support portal for contracting and freelancing professionals, has challenged HMRC claims that its IR35 assessment tool, Check Employment Status for Tax (CEST), is accurate.

The challenge follows the new Government consultation on proposals to extend public sector IR35 rules to the private sector. Mr Chaplin takes issue with the key points HMRC makes in the accompanying ‘factsheet’ supplied with the consultation document, which seeks to dispel rumours about the negative impact the reformed off-payroll rules are said to have had on public sector bodies (PSBs) and contracting professionals since imposed, last April.

Challenging claims that CEST is biased toward delivering inside-IR35 determinations and often fails to produce a determination, the Revenue states that the instrument supplies a clear answer in 85% of cases. The tax authority’s latest figures show that it provides an outside-IR35 result in most (60%) of cases, with only 40% of contractors receiving an employment outcome.

Citing growing evidence to the contrary, Mr Chaplin advises scepticism toward these claims. For example, HMRC has conceded that the CEST tool assumes that Mutuality of Obligation (MoO) is in place. This is a key factor in making accurate IR35 determinations and the Revenue’s presumption is incorrect, Mr Chaplin said. He also referred to expert advice from barristers and IR35 specialists, warning that CEST cannot be relied on to give accurate employment status determinations.

The factsheet refutes claims that the implementation of IR35 reforms last April has led to higher costs in the public sector, insisting instead that most public authorities had seen no cost increases, which were confined to a minority. But, Chaplin cites evidence from the Association of Professional Staffing Companies (APSCo) and global recruitment giant, Harvey Nash, that many contractors have increased their rates following the reforms.

The final claim in the Revenue’s factsheet disputed by Mr Chaplin is that the ‘vast majority’ of public authorities are evaluating whether their contractors are caught by IR35 on a case-by-case basis. Recent evidence from Umbrella Company trade association, the Freelancer and Contractor Services Association (FCSA) found that 50% of them had conducted no IR35 assessments for their contractors, while over a quarter (26%) resorted to blanket determinations.

Also, a joint study between ContractorCalculator and the Independent Health Professionals Association (IHPA) found that 60% of NHS locums were subject to blanket determinations.

It seems that HMRC’s factsheet may contain some misleading claims disguised as empirical evidence

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