The minutes of the latest IR35 forum meeting, which took place on 30th August have recently been released and are mainly concerned with the issues surrounding off-payroll reform and further improvements which need to be made. The outcome of the forum meeting may have played a key role in the Government’s decision to delay the implementation of IR35 reform in the private sector until 2020.
HMRC stated in its ‘Summary of Responses’ document to the consultation on IR35 reform in the private sector that ‘it would say more about MOO’ (Mutuality of Obligation), and the forum discussed potential options in this respect;
“Two possible options being considered are to include information on the CEST landing page, and to redraft HMRC’s position paper on MOO to include additional material. Differences remain in the interpretation of MOO between HMRC and stakeholders.”
Many may remember HMRC’s paper on MOO, in response to the questions raised over its absence from the CEST tool, which simply stated that MOO would already be established if there is a need to use the CEST tool; a controversial opinion which has not been shared by the Tax Tribunal in recent IR35 cases.
Despite HMRC conceding that changes do need to be made, they still seem to be seeking the impossible;
“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.”
A tool which could cover every eventuality would mean that the IR35 rules themselves would have to be drastically simplified. Before the introduction of the tool, HMRC have always stressed the importance of considering each case on its own merits, which no electronic multiple-choice tool will likely be able to deliver.
The minutes refer to the fact that several cases are currently awaiting litigation, which could help to clarify differences in opinion between HMRC and stakeholders. The outcome of the litigation cases will be interesting given HMRC’s lack of success in defending Tribunal cases of late, where despite most of the judgements going against them, they have remained stoic in their stance against employment status issues, particularly over mutuality of obligation.
This also helps to demonstrate why they are perhaps delaying reform until 2020. Should these cases also lead to a conflict in opinion over MOO between HMRC and the Tribunal, it would further support the existing evidence and advise that these differences need to be clarified and this will, no doubt, take time to rectify.
HMRC thanks guidance provided by the ICAEW for the help they have provided on improving off-payroll working in the public sector, which will no doubt help to shape future reforms;
“HMRC agreed the changes would make it clearer and confirmed they will adopt most of the suggestions…”
This can only be good news for refining and improving the legislation. The ICAEW’s paper on the budget shares many issues with IR35 reform as highlighted by many other experts such as the concern surrounding CEST, a contractor’s ability to appeal a decision made by the end client, and greater/better guidance and education; the ICAEW requested a commitment from HMRC to resolve such issues before further reform is implemented.
Although reform is not welcomed by many, any improvements will certainly be helpful to those contractors who have already been affected by IR35 reform in the public sector and have experienced its flaws, and for those who are yet to become embroiled in it, greater education and guidance may at least make the transition slightly less painful