HMRC has come under fire for claiming in the recently released minutes of its July IR35 forum meeting that new public sector IR35 rules have been a success. It went on to say that it “has no evidence of significant impact on attrition rates of contractors working in the public sector.”
James Collings, Chairman of the Association of Independent Professionals and the Self-Employed (IPSE), swiftly criticised the minutes for not detailing a host of significant concerns raised at the forum meeting.
Emphasising that the discussion, which IPSE takes part in, is designed to provide transparency on IR35 issues, he condemned the minutes for omitting frank discussions raised by stakeholders about the negative impact of IR35 on public sector contracting professionals.
Mr Collings revealed that he and other stakeholders had, in fact, raised serious concerns about the damage caused by the rollout of reformed IR35 rules in the public sector. None of these were recorded in the official minutes, which, he said, were published without the informed consent of forum members.
He added: “You would be forgiven for thinking that no public sector organisations have faced contractors walking out and the subsequent delay of crucial projects at all. The reforms have, in fact, caused many contractors to turn their backs on the public sector entirely, and HMRC must be honest about the problems associated with this complex and onerous legislation.”
IR35 expert Kate Cottrell of Bauer & Cottrell underlined the rise of obviously non-compliant “solutions” that HMRC made no mention of. Umbrella Company trade association PRISM has also recently drawn attention to rogue organisations increasing in the aftermath of the reforms. It remains to be seen, Ms Cottrell observed, what contracting professionals will do about incorrect IR35 status decisions when the time for tax returns arrives.
She added that, far from reducing the IR35 population and extending IR35 compliance as expected by HMRC, officials have instead seen their workloads expand dramatically as they are forced to deal with the unintended fallout from the reforms.
The minutes claim that HMRC’s IR35 tax calculator tool, recently renamed “CEST” (Check Employment Status for Tax) from its original “ESS” (Employment Status Service), has been used 450,000 times and has delivered an 85 per cent success rate, although it remains in beta.
However, a survey of 1,500 public sector contracting professionals conducted by Qdos Contractor in May found that 85 per cent of the respondents expressed doubts about the tool’s accuracy.
Commenting on the latest claims regarding CEST, Qdos Contractor CEO Seb Maley said: “It would be beneficial for HMRC to disclose how many contractors are now working inside IR35 in the public sector following the use of the CEST tool.”