• HMRC Found Top Agency that Applies IR35 Blanket Assessments Aug 25, 2018
    Views: 352

    The ContractorUK has recently revealed statistics regarding the off-payroll working rule reform released on April 2017. It shows that the HM Revenue and Customs (HMRC) is the top IR35 blanket decision-making agency.

    Out of the 10 public sector contractors surveyed, nearly 40 percent have their assessment carried out in a group instead of individually. Of these, around 19 percent were engaged with the HMRC, according to statistics revealed by the ContractorUK.

    The joint-second biggest IR-35 blanket decision makers were the National Health Services (NHS) and the Ministry of Defence (MoD). These two public sector bodies that assessed the employment status of contractors in one swoop were also the first ones to take anti-PSC measures event before the IR35 rules were implemented. Other agencies that have applied role-based assessments include the BBC and the Ministry of Justice (MoJ).

    The fact that HMRC is the top agency to apply blanket IR35 assessment is hardly surprising as the tax agency has vehemently defended the introduction of the reform. However, according to a representative at Qdos Contractors, HMRC would never accept that its determinations are a blanket assessment.

    All of the role-based determination by the IR35 has resulted in ‘inside’ decision. However, a group based assessment is unfair. Blanket assessment of the IR35 rules does not consider the contractor’s role, working practices, terms, and special circumstances.

    IR35 is Hard to Implement
    According to the CEO of Qdos, Seb Maley, implementing the off-payroll working rule is not that straightforward. It is not possible to know the employment status without carrying out an individual check. The only exception is when the end-client controlled their contractors and does not accept the substitution.

    The role-based blanket assessments don’t check specific factors like being in business on one’s own account. They tend to favour an outcome of inside IR3 even if the actual case is otherwise. As a result, Qdos have suggested five basic questions to ensure that the role-based assessment accurately depicts the employment status.

    • What is the right sample size for a role-based initial assessment?
    • Will the HMRC provide a clear criterion to determine the result of the value-based assessment?
    • Will guidance will be provided by the HMRC regarding when the role-based assessment is appropriate for end-clients?
    • Will HMRC ensure fair compliance regarding blanket assessment?
    • Will businesses who are found inside IR35 be penalized for blanket rulings?
    Until the HMRC successfully answer the above five questions, the role-based assessment results cannot be considered valid. The tax authority needs to recognize that role-based blanket assessment can result in incorrect and unfair assessments.
You need to be logged in to comment