NO IR35 TAX RISK FOR AGENCIES WHEN USING HMRC'S TOOL
A former HMRC inspector has claimed that recruitment and employment agencies will bear no tax risk as long as their client uses HMRC’s CEST tool when assessing a contractor’s IR35 status.
Philip Manley, former-HMRC inspector and current tax partner at Dow Schofield Watts made the argument in ContractorCalculator and The Law Place’s 18-month investigation into the tax law changes.
Manley explained that agencies may have no tax risk for processing off-payroll contractors using Personal Service Company’s (PSC) if the client has used CEST to assess their status.
Under IR35 legislation, the recruitment, hiring or employment agency is usually liable for a contract hire’s tax risk.
However, ContractorCalculator’s investigation has found that there are a couple of instances whereby the agency would not be liable.
In both these instances, if the agency asks for a reason for a tax status decision or the agency can show that the client has not demonstrated reasonable care in reaching that tax decision, ContractorCalculator claim that the agency can overrule the client’s decision without any liability.
David Chaplin, Founder and CEO at ContractorCalculator explained that this has the potential to be good news for agencies if they want to override a client's tax decision - without even having to inform the client at all.
He said: “The agency could then inform HMRC that it decided IR35 did not apply and that the hirer failed to take reasonable care and consequently made an incorrect decision, relieving the agency of any liability.'
Previously, many agencies were worried that IR35 liability would fall on them. Official guidance from a leading tax specialist on this said: "The recent reform to IR35 within the public sector means that agencies supplying contractors to the public sector are financially liable for the tax status if, after an enquiry, HMRC considers that the agency did not pay the contractor correctly."
On top of this fear, over 85% of recruiters gave negative feedback on HMRC's self-assessment CEST tool in a study last year - showing many were fearful that the tool used to assess this liability was not accurate enough.
CEST is an online tool by HMRC used to determine the IR35 status of an off-payroll contractor. It has been widely criticised by contractors, agencies and contracting authorities.
Source - Recruitment Grapevine
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 ...
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 ...
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 ...
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 ...
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 ...
IR35 REVIEW: APSCO RESPONDS
Following news that the Government has launched an eleventh-hour review of changes to off-payroll working rules in a move ‘to address any concerns from businesses and affected individu ...