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Problems regarding HMRC’s IR35 and tax

Problems regarding HMRC’s IR35 and tax

Some of the ineptitude's of HMRC have been placed in the spotlight following recent behind-closed-doors research into how the department operates.

Despite being commissioned by HMRC itself, the research into IR35 and employment status processes found a problematic level of naivety in how the department approaches modern ways of working.

Contractor UK reports that HMRC had organised the research to help with its development of the IR35 digital tool, which is expected to be released before the end of the tax year.

A spokesperson for one accountancy firm when commenting on its participation in the research said: “They (HMRC) still look at assessing IR35 status by thinking everybody operates in exactly the same way. It’s worryingly naive; they haven’t moved on from ‘one-size-fits-all.’”

Another research exercise, which was run to establish problems faced by employers around categorising worker status, was also criticised.

A staffing boss who participated in the research said: “HMRC are being disingenuous. If they genuinely wanted to solve the problem, then they wouldn’t start so late in the day. On status with personal service companies (PSC) for example, they’re researching a 16-year-old issue some five months before it’s meant to change; is that the action of an organisation that really wants to solve the problem?”

Issues were also highlighted around HMRC’s knowledge and awareness of what was inside or outside IR35.

“It was also news to them (HMRC) that a question would have to be phrased in a particular way to suit the sector being operated in,” said a spokesperson for a firm that specialises in contractor tax affairs. “The question of ‘control’ for health sector would need to be phrased differently to those PSCs in a creative or media environment, and differently to those in an IT situation.”

With seemingly quite a lax approach to such matters, but still holding a lot of the trump cards when it comes to an IR35 investigation, this news simply emphasises the need for contractors to stay one step ahead when it comes to their IR35 status.