Yes, there is a place for IR35 status tools, including HMRC’s CEST and they can provide some assistance when making IR35 status decisions. However, the results achieved all depend upon the accuracy of the data input and the correct categorisation of the party that inputs the data. For example, CEST gives 3 possibilities for this, Worker, Hirer and Agency but what about a Consultancy, which could be a Hirer and/or an Agency? It is vital to ensure that there is complete and correct understanding of the contractual chain and especially who is the “Client” when deciding all things IR35 and off-payroll.
Human intervention is vital at all stages and certainly before inputting data into Status tools and is also essential in establishing all the myriad of issues that need to be considered before a reliable IR35 opinion can be given. See our article on what Bauer & Cottrell consider to be routine considerations, as part of an IR35 contract review.
Here we go again with an IR35 case that has gone on for many years and on reaching the Tribunal HMRC enlists Counsel to represent them v Mr Clark’s accountant. The stress of the situation lasting for so long is more than enough for anyone to bear but add to this Mr Clark’s debilitating illness that was getting worse by the day, this whole issue must have been unbearable. Despite HMRC opening the case in 2014 they have not applied any sense of urgency to resolve it or taken account of Mr Clark’s illness.
A read of the contractual terms raises very serious alarm bells. The contract is clearly Sky’s standard terms covering all sorts of personnel providing services to Sky and not just Presenters like Mr Clark. The terms include a fettered substitution right, a requirement for personal service and 1st call on him, clear mutuality of obligation by way of being paid whether work was done or not via a 2- year contract. The contract was riddled with rights of control with the need to abide by rules, regulations and directions. As to the stated reality of the working practices, as set out by both parties, there was little evidence provided in support of IR35 not applying. For example, Mr Clark claims he organised things with Mr Studd, as a substitute but provided nothing to support this agreement, whereas HMRC showed that Mr Studd was already known to Sky and they paid him directly, which is not true substitution. Evidence that Mr Clark invoiced in advance on occasion (whether doing any work or not) was most unhelpful.
Any competent IR35 contract reviewer faced with these written terms and the reality of the working practices, as explained in the judgment, would have given an IR35 fail opinion. The fact that Mr Clark had a self-employed relationship with Sky from around 1988, only changing when Sky (with the help of HMRC) decided they had got this wrong, would also have been considered by a competent reviewer. Hindsight is of course a wonderful thing but one message to take from this case is that IR35 Contract Reviews were and remain a necessary requirement. Hopefully we will soon see an end to these cases where the engager wants all the controls of an employer with none of the liabilities and risks. Ironically, this case shows that at least something good has come from the IR35/ Off-payroll rules, as the liable party would be the engager Sky. Sadly, too late for Mr Clark though.
To read the whole case please see https://www.bailii.org/uk/cases/UKFTT/TC/2021/TC08300.html
We are pleased to report that HMRC has dropped another one of our IR35 investigation cases. The case was protracted because of COVID and numerous staff changes at HMRC. We pressed for a conclusion and gave a deadline date. Sadly, rather than admitting that our arguments were correct, we got the usual letter from HMRC:
“In the circumstances therefore, and without prejudice, I am not pursuing the matter further. You should note that this does not mean that I accept the arguments that you have put forward are necessarily correct; nevertheless, it is not my intention to put in place formal determinations”
However HMRC phrases it, the result is a win for our client and we keep our no loss record and all without the need to go to the tax Tribunal. Everyone is happy!
The PGMOL case was heard at the Court of Appeal – see https://www.bailii.org/ew/cases/EWCA/Civ/2021/1370.html
This is the case concerning football referees and many hoped to see a clear clarification on the importance of MOO but the C of A has kicked the case back to the FTT to decide “if there is sufficient MOO and control in the individual contracts.” We will have to wait again.
The House of Lords Finance Bill Sub-Committee is seeking views from Engagers, Contractors and Representative bodies as a follow up to their damming report on the off-payroll rules. They are looking for input by 15th November to see if the new rules turned out to be, as devastating, as they predicted.
The National Audit Office has also given notice of its inquiry into “Lessons HMRC has learned from the Public Sector” regarding the off-payroll rules. They do not expect to report until winter 2022 – 5 years after the rules became law in the public sector. Hopefully this will be a robust review and not just hinge upon the many £Millions HMRC has collected from NHS, DWP, MOJ etc so that HMRC claims it has all been a resounding success.
The Budget was silent on all things IR35 and Off-payroll and made no mention of the much hoped for regulation of Umbrella companies. HMRC has been given £130M (over 4 years) to tackle promotors of tax avoidance.
Beware cases of cloning reported by Umbrella companies and Agencies. Some very big organisations have been affected with the result that many workers were not paid for some time.