The IR35 forum which was held in February where industry experts and the HMRC discussed the effect of the IR35 reform in the private sector has its minutes published.
This discussion was set up some weeks before the consultation on the IR35 (5th March) and members concentrated their efforts in prominent areas such as the MoO (Mutuality of Obligation), off-payroll working rules, and CEST—the IR35 tool backed by HMRC.
Members raised their concerns about the non-compliant intermediates, known for promoting their businesses as a silver bullet to the IR35. Meanwhile, the IR35 experts were requested by HMRC to dispel doubts regarding the MoO (Mutuality of Obligation); it is considered a crucial ingredient in evaluating the IR35 status.
The Jensal case—in which Qdos scored a victory for its client—was under spotlight when members received a paper about it and multiple similar IR35 cases which had a common element; MoO’s role decided the outcome of the case. A feedback request for the 7th June 2019 was forwarded by the HMRC to the members. It is quite evident that the taxman is serious about the following IR35 legislation’s detail to receive more clarity.
“HMRC agreed there are difficulties raised by some interpretations of mutuality of obligation in Tribunal cases. HMRC sees this as a result of how mutuality is looked at through different lenses by Employment Tribunals when they are looking at continuity of employment. However, in the tax context, HMRC are prepared to litigate appropriate cases where necessary.”
HMRC assured that they were looking to integrate MoO in the CEST. For now, the highly-controversial tool “assumes” that it is present in each contract. As a consequence, many experts disapprove of this functionality.
In all the forum meetings in the last year, HMRC’s brainchild, CEST received criticism for its unreliable results. There is little to suggest that experts have been incorrect; two years passed since its introduction in the public sector, yet the concerns regarding the technology’s accuracy remain all the same.
The first step to solve a problem is admitting it but HMRC failed to CEST’s shortcomings. However, recently, the taxman has turned into a new leaf—visible by its invitation to the IR35 forum members on collaboration for the tool’s improvement. HMRC acknowledged that they understood that an upgrade of the tool was necessary but for now, they will rely on the current CEST’s answers.