It’s been a week of ups-and-downs for contractors.

The Loan Charge Action Group officially established an All-Party Parliamentary Group (APPG), the BBC has spoken out against the CEST tool’s disproportionate outside-IR35 determinations and the Loan Charge was openly questioned by three separate MPs in parliament.

However, the Government has decided to disregard the House of Lords report on HRMC’s abuse of power, CEST is still being recommended as a determination tool and there are rumours that HMRC is still hiring contractors outside of IR35, despite the ongoing tax crackdown.

A mixed bag at best, so here’s this week’s roundup of evasive takes.

How many contractors now facing the 2019 Loan Charge were hired by a government department?

Edward Davey, Liberal Democrat Spokesperson (Home Affairs), asks:
To ask the Chancellor of the Exchequer, how many people subject to the 2019 Loan Charge were contractors who were contracted to (a) HMRC, (b) a Government Department, (c) a local authority and (d) another public sector body for some or all of the period of the contract the remuneration for which is now subject to the Loan Charge.

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:
The 2019 loan charge is targeted at artificial tax avoidance schemes where earnings were paid via a third party in the form of ‘loans’ which in reality were never repaid, ‘disguised remuneration’ (DR) schemes.

HMRC has never endorsed or participated in disguised remuneration tax avoidance schemes. It is possible for contractors to use disguised remuneration without the participation or knowledge of their engager. As a contracting authority, the majority of HMRC’s contracts are via an agency and use the Crown Commercial Service’s framework contracts, or service contracts with contracted suppliers. Any contractor identified in the course of HMRC’s compliance work as using a tax avoidance scheme would be investigated in the same way as any other contractor.

The Government estimates that up to 50,000 individuals will be affected by the 2019 loan charge. The loan charge applies to all users of DR tax avoidance schemes. It does not single out a specific group or industry. Further information on who the charge effects can be found in HMRC’s issue briefing at: https://www.gov.uk/government/publications/hmrc-issue-briefing-disguised-remuneration-charge-on-loans.

The data requested is not available.

What does it actually mean?
Now we know that HMRC’s Ruth Stanier wrote a letter in response to Lord Forsyth’s request for additional information in regards to disguised remuneration schemes and Making Tax Digital this week, which denied that HMRC has ever used disguised remuneration schemes to pay contractors. However, she didn’t mention the agencies that HMRC have used, and may still be using, to hire contractors through.

We also know that the CEST tool was subject to significant delays due to the IT contractors working on it fearing for their employment status.

The most telling thing though is perhaps the Financial Secretary’s answer itself. Despite denying that HMRC has ever made use of outside-IR35 contractors, he goes on to say that ‘any contractor identified in the course of HMRC’s compliance work as using a tax avoidance scheme would be investigated in the same way as any other contractor.’

This backtrack somewhat robs his answer of conviction.

Will HMRC look to support freelance financial services after IR35 is rolled out to the private sector?

Paul Sweeney, Shadow Minister (Scotland), asks:
To ask the Chancellor of the Exchequer, whether he plans to take steps to support freelance financial service providers following the recent IR35 changes which stipulate they will now be classed as employees of a company.

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:
The off-payroll working rules (sometimes known as IR35) only affect people working like employees and through a company. They do not affect the genuinely self-employed and do not focus on specific trades or professions.

The announced extension to the private sector, and the recent reform in the public sector, do not change the employment status of freelance financial service providers. As in all cases, whether they are employed, or self-employed, depends on the facts of their working arrangements.

The recent changes to the off-payroll working rules in the public sector shifted responsibility for assessing the individual’s employment status from the individual’s company to the public authority. At Budget 2018, the Government announced its plans to extend this reform to the private sector.

HMRC will provide further detailed guidance and support, to help business and individuals implement the reform before it takes effect in April 2020.

What does it really mean?
Basically, it’s a flat no. HMRC has made it clear that the off-payroll rules are black and white (though heavily criticised since the legislation launch) and any worker found outside IR35 will face the due consequences.

The unreliability of CEST, something BBC chiefs attested to this week, has not been mentioned. The promise of further detailed guidance and support has, however. That said, the quality of previous HMRC-issued support has been dubious; webinars advising blanket determinations to NHS bosses and the use of a low-traffic website to make IR35 and Loan Charge announcements don’t bode well.

Will HMRC do anything to stop the retrospective aspect of the Loan Charge?

Alistair Carmichael, Liberal Democrat Chief Whip, Liberal Democrat Spokesperson (Northern Ireland), asks:
If he will take steps to prevent the 2019 loan charge from being applied retrospectively.

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:
The loan charge is not retrospective. The schemes that were entered into and to which the loan charge relates have always been defective—they never worked, including at the time when they were entered into. That has been evidenced by a number of court cases, including one put before the highest court in the land, the Supreme Court.

Alistair Carmichael, Liberal Democrat Chief Whip, Liberal Democrat Spokesperson (Northern Ireland), further responds:
Her Majesty’s Revenue and Customs is allowed to go back to 1999 to look at tax records. Records that it can look at include those in otherwise closed years. If that is not retrospective, I don’t know what it is. What word would the Minister use to describe the loan charge to my constituent, who tells me that he started a business working in the oil and gas industry, living in Orkney but working across the globe, doing everything the Government would want him to do? How does he now find himself facing bankruptcy, before his 29th birthday?

What does it really mean?
This one is pretty clear of its own accord, no further comments needed.

Takeaways for the week

Continued denial of all of the negative aspects of the 2019 Loan Charge and CEST tool will do HMRC no good. Not only does it prevent the conversation from progressing, but it fans the growing anger that can be seen across social media, contractor forums and in articles across multiple authorities on the subject.

Unfortunately, the Government’s decision to disregard the House of Lords' multiple recommendations on how HMRC’s operation should change is a disappointing one. Hopefully, the Loan Charge APPG will prove a big step towards winning a fairer future for UK contractors and freelancers.