HMRC Dramatic change of thinking on IR35

HMRC Dramatic Change of Thought on IR35
HMRC Dramatic Change of Thought on IR35

HMRC Dramatic Change

Has there been an HMRC dramatic change of thinking on IR35?

According to the minutes of the latest meeting of the IR35 Forum, set up by the Government to clarify IR35, HMRC are about to change their thinking dramatically as regards the definition of a contractor and a disguised employee – and the difference between the two.

Previously, and this is a big nuisance for contractors, they looked on it on an individual contract basis. So it wasn‘t the contractor that was inside or outside IR35. It was the contract and the way it is carried out.

Inside and Outsice IR35

That meant that on one contract a contractor could be outside IR35 and on the next he could be inside.

Most contractors do pretty much the same thing. They operate in pretty much the same way contract-to-contract so this was a bit of a nonsense.

However, HMRC are shifting to an overall view of a contractor and whether IR35 catches them or not.

They will look at his or her overall way of operating.

Contractor’s IR35 Position Known

That sounds good news. It will mean that a contractor will know his or her position better and can also change his overall position.

However, HMRC, especially at the moment, are not looking to lose themselves a load of tax money.

It could also mean that it would be more worthwhile for them to pursue a contractor. This is because they will be chasing him or her for taxes from not just one contract but for maybe years of contracting revenues from multiple contracts.

That is the danger.

Simplifiied IR35 Rules

It will be very good idea if the IR35 rules were simplified. That’s so everyone knows where they are and whether inside or outside.

However, if that simplification means that they will catch more contractors that won‘t be so good news.

This IR35 Forum is a good idea but is fraught with danger.

One hopes it turns out well.

Let’s hope there has been a HMRC dramatic change of heart.