Transport for London Contractors IR35 Raid by HMRC – New Terror Tactic

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Transport for London Contractors
Transport for London Contractors

Transport for London Contractors

Transport for London contractors were hit by a new shock when HMRC got in touch with TfL to demand information on the contractors working there. HMRC wanted information about their contractors who operate via personal service companies.

The HMRC raiders are from the department that monitors the new off-payroll rules. HMRC are obviously looking into whether Transport for London is applying these rules properly for their contractors. Transport for London is a public sector company so this is not a raid prior to the introduction of the private sector IR35 rule changes in April 2020.

Transport for London has been operating under the new IR35 rules since April 2017. This is when the Government introduced the IR35 reforms in the public sector.

Questions on Transport for London Contractors IR35 Raid

  1. Why did Transport for London get raided by HMRC?
  2. Who is responsible for deciding a contractor’s IR35 status?
  3. How can companies guarantee that they won’t misapply IR35 reforms?
  4. How successful have HMRC been in winning IR35 cases against contractors?
  5. How Many Contractors Pass HMRC’s IR35 Test?
  6. What will happen to Transport for London Contractors?

Why Did Transport for London Get Raided by HMRC

HMRC obviously suspect that Transport for London are misapplying the IR35 reforms. These were introduced to the public sector in April 2017 . They will be introduced to the private sector in April 2020.

The NHS has already been hit with a £4.3 million bill for supposedly not applying the IR35 rules properly.

Who is Responsible for Deciding a Contractor’s IR35 Status

According to the new rules it is the hiring company which must decide a contractor’s IR35 status. Previously it was the contractor who determined that. If the rules are misapplied then the hiring company will be hit by the bill.

However, there are surefire ways to make sure that this does not happen

How Can Companies Guarantee That They won’t Misapply IR35 Reforms

However, companies should be safe enough if they make their contractors take HMRC’s online IR35 test. That’s the Check Employment Status for Tax (CEST) test.

HMRC have put a guarantee on those tests. They say that if a contractor passes the test then they won’t pursue the company for the contractor’s missing tax. That’s even if the contractor is later shown to be inside IR35.

The CEST test is generally believed to be a heap of crap. It favours HMRC who created it in the first place.

How Successful ave HMRC Been in Winning IR35 Cases Against Contractors

HMRC have lost 80% of their cases against contractors at the lower tier tribunal – even though they have the pick of any contractors in the country that they could potentially prosecute.

So, their judgment on who is inside IR35 and who is outside has not been a huge success.

However, it remains the case that passing the CEST test is the only surefire way of being able to use ones personal service company without any potential redress from HMRC.

How Many Contractors Pass HMRC’s IR35 Test

According to the latest figures, 54% of contractors pass that test, 31% fail it and 15% of the tests are indeterminable.

One wonders how companies and organizations can go wrong here. Some companies are using other IR35 tests other than the HMRC One, like the Grant Thornton one. These ones are probably more accurate than HMRC’s test.

However, they don’t come guaranteed like the CEST test.

What Will Happen to Transport for London Contractors

Well, according to their agency, nothing should happen to the Transport for London contractors They must be confident that their contractors at TfL have all sat the HMRC test and passed it. Or perhaps they have sat some other IR35 test and passed it.

However, HMRC may believe that TfL have misapplied the IR35 rules.

Then there would be problems.

See also Contractors Set Up IR35 Resistance Group – Join Up

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1 COMMENT

  1. Unbelievable how HMRC is destroying this highly skilled and flexible workforce how takes all the risk of their employment. This will damage the private sector like it has in the public sector.

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