blog header image

Posted : 29 May 2018 at 11:25:57
Category: Payroll News

Share this article

Thousands taxed incorrectly in ongoing IR35 fiasco

Thousands of hires in the public sector are being taxed incorrectly as a result of blanket tax decisions made by public sector hirers. This shocking revelation comes off the back of an investigation into HMRC’s IR35 self-assessment tool [CEST] which found that 54% of assessments carried out by the tool obtained an “IR35 does not apply” result. With many public-sector bodies lacking faith in the tool – currently the IR35 rule only applies to contractors working in the public sector – many hirers and recruitment firms, citing confusion and fearing fines, made blanket decisions on their contract hires; deciding that IR35 did apply.

Commenting on figures unearthed by the FOI, Dave Chaplin, CEO and Founder of ContractorCalculator said: “We know that blanket assessments were imposed within the NHS and Ministry of Defence (MoD) as well as on other key projects and now those bodies face considerable litigation risk because many contractors have been wrongly classified.”

Chaplin also slammed HMRC’s attitude to the decisions their IR35 tool made, saying that although they initially said they would stand by the tool’s decisions the Government gave themselves room to challenge the decision. Chaplin believes this creates further fear which creates further incorrect tax decisions.

“HMRC essentially granted itself the freedom to challenge any assessment that it sees fit. Though hirers and agencies are effectively coerced into using the tool by HMRC, they know that an outside IR35 evaluation from CEST still poses significant tax risk,” he said. “The disparity between the number of contractors who are told IR35 does not apply by CEST and those who are taxed as being outside of IR35 is no coincidence. “Receiving a pass from CEST is the equivalent to being presented with a dodgy MOT certificate. In light of this, it isn’t too surprising that so many hirers have taken the supposedly risk-averse option. They simply do not trust CEST’s results.”

The latest IR35 finding comes just days after an official accountants trade body wrote to the Financial Secretary of the Treasury advising that HMRC’s tool for self-assessment is not suitable for the private sector if it were to be rolled out. Chaplin concluded: “It’s evident that asking hirers and agencies to assess IR35 status has been a massive error of judgement. Promoting CEST, a tool intended to support hirers, but which creates even more uncertainty instead, has only compounded the situation.”

IR35 was originally tweaked to make up a shortfall in HMRC’s tax revenue. Since its rollout last year, recruiters and contractors alike have lambasted the fear and confusion it has caused.

SOURCE: Recruitment Grapevine

SIMILAR NEWS

blog header image
PAYROLL NEWS
CHANGES TO THE HMRC EMPLOYMENT STATUS MANUAL WITH REGARDS TO UMBRELLA COMPANIES

It is good to see the HMRC trying to make adjustments to the rules set to protect the workers using Umbrella companies but this just goes to show that they really do not understand how most of the Pay ...

blog header image
PAYROLL NEWS
STATUS DETERMINATION STATEMENT: OFF-PAYROLL EXPLAINER FOR APRIL 2021

The off-payroll framework is fast approaching, there are still two of the key requirements of the new IR35 legislation from April 2021 which seem to be shrouded in mystery, the main legislative obliga ...

blog header image
PAYROLL NEWS
IR35 - RISK TO CLIENT/BUSINESS

Article from Alexander Wilson LL.B. (Hons.) (Dunelm.), CTAIR35 barrister and CTA - Helping all corporations safely retain independent contractors with strong legal advice"Inside IR35" is NOT ...

blog header image
PAYROLL NEWS
HMRC INTERNAL MANUAL EMPLOYMENT STATUS MANUAL

HMRC internal manual Employment Status Manual Published: 7 March 2016 Updated: 10 February 2020 see all updates Agency and temporary workers: the agency contract and the requirement for personal ...

blog header image
PAYROLL NEWS
IR35 POLL RESULT – CONTRACTORS WILL DUMP CLIENTS ISSUING PSC BLANKET BANS

IR35 Poll ResultThe ITContractor.com IR35 poll result shows that a vast majority of UK contractors plan to dump their clients if the client issues a blanket ban on contractors who use personal service ...

blog header image
PAYROLL NEWS
HMRC PENALISED DIRECTOR INSTEAD OF COMPANY

The first tier tribunal overturned the late filing penalties of a sole director for three reasons: the wrong taxpayer was named, HMRC misapplied the law, and she had a reasonable excuse.Angela Salazar ...

business-directory Business Directory
smartbusinessdirectory Payroll Services Business Directory
truebusinessdirectory payroll-services Directory
payroll-services Directory