Seb Maley from Qdos was not surprised that the IR35’s reform draft legislation in the private sector is similar to those changes that were also added in the public sector in 2017. This is because HMRC seems to believe that their reform in the public sector was a major success, he disagrees. Mr. Maley believes that the legislation can be rectified with a few tweaks, making it suitable to be implemented in the private sector.
Among the considerations that HMRC has targeted to modify is the action taken by a contractor if they want to appeal against an IR35 decision that was wrongly taken by their end-clients.
Therefore, a “Client-Led Status Disagreement Process” is expected to be released; HMRC opines that it can allow contractors a right to change determinations that they believe are incorrect, unfair, or risk-averse.
Such initiatives that facilitate contractors to get a better shot to adjust their tax status must be welcomed. However, still one cannot ignore the fact that it was HMRC that allowed the end-client to have the final say.
What this means is that according to the proposed rules, whenever a contractor initiates an appeal against the decision of their clients, then the client’s assessment will stand.
Experts opine that this should concern should not be underestimated as after April 2020 when the IR35 comes into effect in the private sector, HMRC seems to set its sights on restricting the freedom from the contractors to lodge appeals.
Presently, contractors of the private sector have a wide range of options to select from while challenging HMRC for an IR35 decision.
For instance, contractors can ask the ADR (Alternative Dispute Resolution) to help them. In this process, a neutral HMRC official who has no prior contribution in the case becomes a mediator between both parties.
Still, it may not seem like the most resounding solution to get a review from an HMRC official, and there are still debates on the integrity of the ADR. However, that being said, Mr. Maley gave an example of a recent IR35 case that ran for over two years. After ADR organized a meeting, HMRC conceded that the IR35 was not applicable to the engagement and backed off, closing the case. This suggests that if a coordinated review examines facts—despite the inclusion of an HMRC employee—justice can be delivered.