HMRC Warning Letter Over IR35 Changes
43,000 companies are to receive a HMRC warning letter about the IR35 changes coming soon.
The letter warns them to consider the employment status of their contractors before the new IR35 reforms are implemented. The off-payroll reforms will be implemented in April 2020.
They are writing to all companies who use contractors.
Contractor Questions on HMRC Warning Letter
- What effect are the HMRC warning letters having on companies?
- Why have HMRC fined the NHS £4.3m over IR35?
- Does the HMRC IR35 tool reflect court verdicts in favour of contractors?
- Who has the onus of proof on using substitutes?
- Who are the judge and jury when companies are fined over IR35?
- Why is the HMRC warning letter causing so much disruption to UK companies?
What effect are the HMRC warning letters having on companies
These letters appear to be having the desired effect as most major UK companies are going to consider the legislation to such an effect that they are going to blanket ban the use of personal services contractors altogether after April.
HMRC promised that if companies use their Check Employment Status for Tax test they would stand by the results. That’s even if the contractor was later found to be inside IR35. There was one proviso. The data entered must be correct.
Why have HMRC fined the NHS £4.3m over IR35
So the NHS tested all their contractors as HMRC advised using HMRC’s CEST tool. HMRC have now fined the NHS £43m for misusing the CEST tool. Who decided that they misused the tool?
It was HMRC. This is he same HMRC who have lost 80% of the cases they have brought against contractors at Employment Tribunals. Judges have time and again sided with contractors views of IR35 over HMRC’s views of it.
Does the HMRC IR35 tool reflect court verdicts in favour of contractors
Yet, HMRC are not updating their tool to reflect verdicts given in favour of contractors at Employment Tribunals.
It also appears to be that you can get any result you want from this CEST tool. Companies are using it to deliberately fail their contractors.
One major company told their contractors beforehand that they would virtually all fail the CEST test.
Then, when the contractors failed the test they were given as one of he three reasons that they had never used a substitute. However, this argument was blown out of the water in the HMRC v Lime-IT Employment Tribunal case.
Who has the onus of proof on using substitutes
The judge said that the onus of proof was on HMRC to prove that a substitute would not have been used if the opportunity came up. The judge said that it cannot be assumed that the contractor would not have provided a substitute just because she never had.
Yet this verdict has obviously not been fed into the CEST tool.
Surely this is misusing the CEST tool.
Should someone not be fined here?
Who are the judge and jury when companies are fined over IR35
So, who was the accuser as regards whether the NHS misused the tool.
It was HMRC.
Who were the police, the judge and the jury in the NHS case.
It was HMRC.
Who is the appeals judge if NHS wanted to appeal?
It would be HMRC – the ones who lose most of their cases they bring against contractors.
One wonders why out major companies don’t put up a bit more of a fight over this.
Why is the HMRC warning letter causing so much disruption to UK companies
Now HMRC are sending out warning letters to every single company in the country that uses contractors.
No wonder so many major companies are being intimidated into not using PSC contractors at all in the future. This is causing major disruption at all our major companies with many contractors deciding to quit rather than go PAYE when they believe they are outside IR35.
Who can stop this madness?
Please share this article using the social media buttons at the top and bottom of the page.
Ad – Contractor Services
Many private sector contractors are likely to be told by their client company either that they must operate as an off-payroll employee or join an umbrella company. It’s time to plan for that now.
They need to look at umbrellas ASAP.
Do you need an umbrella company that is right for you and returns you most? Fill out the form below to receive a call today.
For all necessary business insurance, including IR35, click on Business Insurance for Contractors