Politicians are often slippery when it comes to answering questions, especially so when the subject addressed is murky. It doesn’t get much murkier than the IR35 reform, as announced in Budget 2018, and its draconian sibling the 2019 loan charge.

IR35 has proved devastating to the public sector, resulting in huge drops in NHS staff and specialist IT contractors to mention only a couple. Crossrail is also late coming over the line, with much speculation that IR35 can be blamed at least in part.

Yet the Treasury is still skirting the truth (despite numerous public slip-ups, like one infamous webinar instructing NHS bosses to just blanket determine staff as in-IR35) when it comes to facing questions with unpopular answers.

So, here’s a roundup of HMRC’s most evasive takes over the last week.

How much will HMRC make from IR35 reforms?

Alison McGovern, Chair Speaker's Advisory Committee on Works of Art, asks:
To ask the Chancellor of the Exchequer, what projections has his Department produced of the tax receipts arising from the changes to IR35 rules as announced in Budget 2018?

Mel Stride MP, Chancellor of the Exchequer, responds:
The off-payroll working reform in the private sector, announced at Budget 2018, is projected to increase tax receipts by nearly £3 billion over the period 2018-19 to 2023-24. This estimate has been independently assured by the Office for Budget Responsibility.

The off-payroll working rules (commonly known as IR35) are in place to ensure that individuals who work through their own limited company (e.g. personal service company) and would have been an employee had they provided their services directly, pay broadly the same tax and National Insurance as other employees.

What does it really mean?
While Mr. Stride may not be fudging the £3 billion stated, he’s not specified who exactly will be paying.

The largely criticised CEST tool, developed by HMRC to make ‘accurate’ IR35 determinations, is missing some key questions used in determining IR35 status. It completely omits Mutuality of Obligation (MOO), for example, which is universally agreed to be an essential part of any employment contract. It’s also solely geared up for individual contractors as opposed to employer assessment.

Inevitably, that bill will fall to contractors. They’ll also be expected to pay ‘broadly the same tax and [NI] as other employees’ in a much shorter time frame, resulting in substantial financial stresses.

What is HMRC doing to protect those affected by the loan charge?

Ross Thomson, Conservative, Aberdeen South, asks:
To ask the Chancellor of the Exchequer, what steps he has taken to ensure that those affected by the 2019 loan charge are not forced into bankruptcy by the repayments.

Mel Stride, Chancellor of the Exchequer, responds:
Disguised Remuneration (DR) schemes are contrived arrangements that pay loans in place of ordinary remuneration with the sole purpose of avoiding income tax and National Insurance contributions. On average, loan scheme users have twice as much income as the average UK taxpayer, when taking into account the loan they received.

HMRC is working hard to help individuals get out of tax avoidance for good and are encouraging anyone who is concerned about their ability to pay to contact them as soon as possible to discuss their options. HMRC has set up a dedicated helpline for those wanting to settle their avoidance scheme use, and discuss payment options.

HMRC does not want to make anybody bankrupt and very few cases ever reach that stage. They will work with all individuals to reach a manageable and sustainable payment plan wherever possible.

What does it really mean?
When Mr. Stride says that ‘loan scheme users have twice as much income as the average UK taxpayer’, he neglects to discriminate between genuine fraud and genuine contractors.

Contractors receive tax relief to cover their overheads. In short, they must provide for themselves everything necessary to do their job as well as the security that employment rights offer (like sick and holiday pay), all of which is taken care of by employers for employees. To lump contractors in with fraudsters on the basis of 'paying less tax' shows a worrying lack of understanding.

Whilst the group of people Mr. Stride refers to above certainly will include those out for personal gain, a substantial amount will be people unaware of their wrong-doing, especially as many schemes were perfectly legal at the time of involvement.

It was also made evident in the cornerstone debate initiated by Steve Baker MP back in November that the proportion of employer vs individual debt collection is vastly unfair. In fact, it seems disproportionately more prevalent for contractors themselves to land a huge retrospective tax bill as opposed to the employers often responsible.

Despite Mr. Stride's statement that HMRC doesn't wish to bankrupt anyone, their actions thus far suggest otherwise.

How much has IR35 and the loan charge cost to implement so far?

Peter Dowd, Shadow Chief Secretary to the Treasury, asks:
To ask the Chancellor of the Exchequer, how much revenue has accrued to the public purse from anti-avoidance measures to tackle disguised remuneration since 2011.

Mel Stride, Chancellor of the Exchequer, responds:
Disguised Remuneration (DR) schemes are contrived arrangements that pay loans in place of ordinary remuneration with the sole purpose of avoiding income tax and National Insurance contributions.

The Government introduced legislation in 2011 to target arrangements intended to disguise remuneration, which were forecast to raise £3.8bn. At Budget 2016, the Government announced a package of changes, including the charge on disguised remuneration (DR) loans, which are estimated to raise £3.2 billion for the Exchequer by 2021. Further information can be found in the ‘Disguised remuneration: further update’ policy paper, published on 22 November 2017: www.gov.uk/government/publications/disguised-remuneration-further-update/disguised-remuneration-further-update.

What does it really mean?
Mr. Stride doesn’t even attempt to answer the question here. When asked how much the IR35 reform has cost thus far, he instead repeats the goal revenue amount.

This suggests that the real answer is far from good.

Takeaways going into 2019

In positive news, there have been many protests against both the IR35 reform and the loan charge, with MPs of all colours unified against the propositions.

As well as the aforementioned debate, a damning report from the House of Lords raised strong concerns as to how HMRC is using it’s inflated powers. Even the questions featured in this article engender optimism that both the loan charge and IR35 rules will be revisited with a much more compassionate eye in the new year, provided MPs stay dogged.

There is valid hope that HMRC can be brought to heel in 2019, at least enough so as not to bankrupt thousands of contractors across the country in the name of 'revenue'.

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