Government publish IR35 forum meeting minutes

07 November 2018

  • HMRC confirms its plans to attempt to fix the Check Employment Status for Tax (‘CEST’) tool

  • The CEST tool isn’t suitable for use in the private sector

  • HMRC to redraft its position paper of Mutuality of Obligation (‘MoO’)

  • HMRC to explore developing best practice standard for umbrella companies

The IR35 Forum has published minutes of their meeting held on 30 August 2018. The minutes include a summary of the action points discussed which include;

  1. HMRC to issue revised note on MoO
  2. HMRC to update the Forum once possible improvements to the CEST tool have been considered
  3. HMRC to send link to Spotlight 45 “umbrella companies offering to increase your take home pay” to all members

The key points from the Forum meeting were the CEST tool and HMRC’s interpretation of MoO which the minutes confirm resulted in a number of constructive suggestions being received on the further development of CEST. Two possible options which are being considered are to include information about MoO on the CEST homepage and to redraft HMRC’s position paper on MoO to include additional material.

HMRC agreed that it would be helpful to expand on their position on MoO to cover the competing arguments about the significance of continuing MoO where there is a succession of short engagements.

The Forum members were of the view that CEST required some improvements to work more effectively in the larger and more diverse private sector. Areas of concern included: MoO; how CEST did or didn’t deal with cases where an individual had a range of engagements which suggested they were in business on their own account; and that it should reflect the outcome of litigation since its introduction in March 2017.

The Forum also discussed interest on IR35 settlements, off-payroll working guidance, accounting for off-payroll, an update on agency/umbrella standards and rights of appeal. Further points discussed were;

  • Members asked HMRC to look at the use of Collection & Management (C&M) powers to allow an offset and to streamline the settlement process. It was agreed that HMRC and the Forum would set up a working group to develop a note for agents covering the settlement process.
  • HMRC to respond to ICAEW separately to each point raised in their off-payroll guidance paper with a view to adopting most of the suggestions.
  • The Forum asked HMRC to explore the scope for developing some best practice standards to help address non-compliance, particularly by some umbrella companies. HMRC stated that non-compliance by employment intermediaries is largely deliberate rather than a result of a lack of awareness. The Forum confirmed that HMRC’s recent Spotlight 45 on umbrella’s offering to increase your take home pay was useful, clear and helpful.

The Forum also published HMRC’s presentation slides which discuss; background to the reliefs available, section 139 (Corporation Tax Relief), Section 58 (Dividend Relief) and how interest accumulates on liabilities.

Aspire Comment

The minutes make an important revelation as to the position we are in ahead of the off-payroll rules coming into force in the private sector in April 2020;

HMRC commented that there needs to be a balance between a tool that is simple and straightforward with a relatively small number of questions, suitable for the majority of customers, and attempting to cover every eventuality.

Despite the minutes confirming that HMRC are aware that the CEST tool isn’t fit for purpose and their stance on MoO is flawed, they also demonstrate a striking lack of understanding toward the complexity of employment status, preferring to put complexity to one side in favour of simplicity. A misunderstanding which has led to more than a few Tribunals ruling in the favour of the taxpayer!

Whilst many remain unconvinced that HMRC will be able to produce a tool which can accurately identify employment status in 100% of cases, the question still remains; is an individual’s employment status something which can be determined by a tool at all?