New approach to IR35 put to HMRC

Outlined by the Chartered Institute of Taxation, the approach rejects the SDCs (‘Supervision, Direction or Control’)  test in favour of an annual reporting obligation on end-users.

Based on each PSC contractor initially assessing whether or not IR35 applies, the end-user would then take that assessment and report to the Revenue whether or not it is in agreement.

If the end-user was to “wilfully” mislead HMRC that IR35 did not apply, when in fact it did, then any debt owed by the PSC under IR35 would “fall back” to the end-user, the CIOT said.

This approach would be better than ‘SDC’ because, under such an “inherently subjective test”, many PSCs who are “genuinely in business for themselves” would be wrongly caught.

So SDC would be contrary to an aim of the IR35 discussion document – not to widen IR35’s scope. It wouldn’t simplify administration, nor would it cut non-compliance, CIOT added.

It also believes that HMRC should accompany the new reporting obligation with a campaign to “give greater publicity to their successes in IR35 cases”, to increase awareness of the rules.

7 thoughts on “New approach to IR35 put to HMRC

  1. its better to be safe then’s best to get in touch with the professionals to avoid running into big problems further down the road.

  2. Regardless of the outcome over IR35, contractors are already at a significant disadvantage from a tax perspective, due to the disproportionate amount of technical analysis that needs to be carried out.

  3. Whilst contractors will be relieved that no knee jerk measures to address IR35 were announced at the Autumn Statement, a lack of clarity over the Government’s next move leaves the contingent workforce in a period of uncertainty.
    HMRC is granting more consideration to the legislation than it previously has, and expects a consultation to follow. Considering the increasing emphasis placed on supervision, direction or control (SDC) within the IR35 discussion document and its involvement with travel and subsistence (T&S), SDC will play a major part in any new Legislation. By extending the control tests to SDC, HMRC would widen the catchment of people caught by IR35.

  4. “The Revenue is really cracking down in this area,” she said. “It has committed to investigating 250 new enforcement cases a year, and typically has around 400 active cases at any one time.”

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