HMRC releases IR35 Contract Review data
Five of the 32 recommendations the IR35 Forum made in its administrative review of IR35 concern the taxman’s Contract Review Service (CRS).
Only one of the five has been accepted by HM Revenue & Customs, but the tax authority agreed to a recommendation that .gov.uk revisits its IR35 content, including details on the CRS .
The potential, then, to regard HMRC as agreeing to two CRS recommendations (not just one) helps make sense of a statement to FreelanceUK from an IR35 advisory that “improvements” to the CRS are welcome.
The first is for .gov.uk to better publicise CRS, notably as a confidential service. The second is for HMRC to “consider” publicising CRS on its web-pages about non-statutory clearances.
These actions are “positive,” according to the IR35 advisory. But it says that it “very much doubts” that freelance contractors will now “clamour” to use the CRS as a result of either agreement from HMRC.
That’s mainly due to what HMRC says in the IR35 Review is concern about “the scope for customers to perceive that discussions with the CRS might not remain confidential.”
The HMRC review, run in partnership with the IR35 Forum, reflects: “We recognise these concerns and that they are unlikely to be addressed effectively by further assurances.”
The tax department also recognises seven key challenges that the CRS faces, which appear to be the main reasons why it is “not used as much as HMRC…would want.”
Other than taxpayers’ distrust, the biggest challenges are positioned as insurances being invalid if CRS is used, and HMRC being unable to ‘guarantee’ the view it gives at the end of CRS. Experts in the private sector advising against using it hasn’t helped its uptake either.
Moreover, the service is seen as “too slow and cumbersome” to meet the 28-day deadline required by public sector departments bound by the tax 'assurance process,' which they should follow when using 'off-payroll' workers.
Also in the 48-page document, the Revenue says there is a need for it to publicise the CRS (as well as its IR35 Helpline) to greater effect, as suggested by the PSC Committee. It’s seemingly with that need in mind that data on the CRS has been released:
For the year ending 31/03/2013, HMRC received 80 contract review requests of which they were able to give an opinion on 12.
For 2013/14, HMRC received 64 contract review requests of which they have been able to give an opinion on 16. The requests and the reason for not being able to give an opinion consist of the following:
|Phone requests (no contract)||26||0|
|Draft or generic contract||12||11|
|No written contract||13||0|
|No sight of upper level contract||5||8|
|Handed off - (passed to specialist team with customer’s agreement – e.g. media sector)||1||0|
|Not an intermediary||3||6|
|No response (further info sought)||0||9|
Caught or not caught?
Of the opinions provided in 2012/2013, 10 were considered ‘not caught’ by IR35 and 2 were considered to be ‘caught.’ In 2013/2014, 14 of the opinions were considered to be ‘not caught’ and 2 were considered to be ‘caught.’
HMRC said: “Clearly the evidence shows that the majority of opinions provided are ‘not caught’ by the legislation, even though there is a general perception that if you seek IR35 advice from HMRC you will be ‘caught.’”