Are Government IR35 Reforms Retrospective for Contractors? HMRC View

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Government IR35 Reforms Retrospective
Government IR35 Reforms Retrospective

Government IR35 Reforms Retrospective

Are the Government IR35 reforms retrospective in the private sector or not? The Government appear to say that they are not. But are they? although they say that the reforms are not retrospective they have given themselves a lot of wiggle room. Here’s what the Government said when announcing the IR35 changes in the Finance Bill.

Are Government IR35 Reforms Retrospective or not?

  • The Government confirm that they are not retrospective
  • HMRC will focus their attention on making sure that businesses comply with the IR35 rules in new engagements rather than reviewing past engagements
  • HMRC confirm that they will not carry out targeted campaigns for previous years when contractors start to pay the off-payroll tax for IR35 for the first time
  • A company’s decision on whether a contractor is inside the rules will not automatically trigger an investigation for previous years for a contractor

HMRC Will Focus on New Contractor Engagements

They appear to confirm the Government IR35 reforms retrospective case. However, look at what else they say.

HMRC will focus their attention on making sure that businesses will comply with the new IR35 rules.

The Government say HMRC will focus on new engagements. However, this dos not rule out HMRC chasing contractors for previous taxes along with penalties and interest.

No Targeted IR35 Campaigns for Previous Years Tax

They then say that they will not carry out targeted campaigns for previous years and previous contracts. However, not having ‘targeted campaigns’ does not rule out chasing individual contractors for previous years taxes. They leave themselves wiggle room to do so if they please.

Company IR35 decision Will Not Automatically Trigger IR35 Investigation

The then say that a company’s decision on whether a contractors is inside the rules will not automatically trigger an investigation for previous years. The key word here is ‘automatically’. This does not rule out contractors being investigated for previous years and previous contracts after a company decision that the contractor is now inside IR35.

One of the worst things about IR35 for contractors is the uncertainty. However, the Government have now heaped a whole load more uncertainty on them.

Why not just say that HMRC won’t investigate previous years for contractors? After all, it may just mean that the contractor has failed HMRC’s Check Employment Status for Tax (CEST) test which is much ridiculed. Failing that doesn’t necessarily mean that you are inside IR35 by law.

So, are Government IR35 reforms retrospective or not? Well they might be and they might not be.

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