December is here already and Christmas will soon be upon us with 2018 nearly at an end. The last few years have not brought the best of news for contractors, with HMRC remaining fixated on the use of personal service companies (PSCs) as a means of tax avoidance.
It is clear that HMRC are not tiring in its focus on contractors, with reform of IR35 being introduced into the private sector from 2020, however this time around, HMRC have provided some time to prepare, and perhaps HMRC realise that the private sector (which represents a much larger portion of business than the private sector), will not roll over quite so easily.
The fact that HMRC will be introducing a second consultation document on reform in 2019 also indicates that HMRC recognise there are some flaws with the legislation which must be resolved prior to roll out of the IR35 rules. The purpose of the consultation will be to discuss “the detailed operation of the new rules [which] will be published in the coming months”, and will be used to inform the draft Finance Bill legislation expected to be publish in Summer 2019; this therefore indicates that the second consultation will be published within the first few months of 2019.
Although contractors have had a tough time this year, HMRC haven’t had a great deal of success either (although they might not admit it). They claim that an extra £550m has been remitted from IR35 reform in the public sector, but this claim is somewhat premature.
Many contractors might wish to appeal the decision and 2019 could bring many more employment tribunal cases with it, as with Susan Winchester, who worked for HMRC via her own company, and successfully claimed rights to holiday pay after being determined an employee.
HMRC’s success at the Tax Tribunal has been poor, with the majority of decisions going against them. In a particular case involving Tony Elbourn, who had used HMRC’s Check Employment Status for tax Tool (CEST) to determine his employment status, the decision was overturned by the Judge as being incorrect, providing even more ammunition to criticise the already disparaged CEST.
The above examples demonstrate that the whole issue over employment status in general is a long-term problem which needs to be addressed, as set out in Matthew Taylor’s report, “The Taylor review of Modern Working Practices” released earlier this year.
Perhaps IR35 reform will not work as it should until this is fully addressed. HMRC released a consultation document on employment status following Matthew Taylor’s report, and we await the ‘Summary of Responses’ which is likely to be published in 2019.