Tax & admin · 4 May 2017

Contractors accuse HMRC of giving incorrect IR35 advice

IR35 advice
HMRC’s online IR35 tool has been criticised for its lack of legal substance

Public sector contractors seeking IR35 advice from HMRC received incorrect information from the tax office’s call centre, according to an organisation representing Britain’s contracted workers.

After seeking IR35 advice and clarity on their working status, PRISM members – the non-profit group representing contractors – said advisors at HMRC misinformed them on their rights to travel and subsistence expenses.

The latest claims are regarding misinformation on their situation as a limited company owner.

New IR35 reforms were introduced this year to ensure contractors working within a public sector organisation paid the equivalent in taxes as a permanent employee performing the same role.

Following an online self-assessment, the organisation then applies taxes to the contractor in the same way as regular workers.

HMRC’s new IR35 rules meant pushing the responsibility for assessment onto the public sector hirer, and many have in turn devolved that to recruitment agencies and the contractors themselves.

Reform has left many contractors confused, particularly regarding the online self-assessment tool provided by HMRC.

Commenting on the allegations from PRISM members, CEO Crawford Temple said the fact HMRC’s own employees had failed to fully grasp new IR35 reforms indicated the system was too complex for contractors to be expected to adapt to.

“This is the most recent change to the tax legislation affecting contractors and the mistakes being made by HMRC are causing confusion and further tensions across the market,” Temple said in a statement.

“This is more evidence, if any were needed, that the whole system of tax and employment legislation is too complicated for people to understand.

“If those within HMRC are giving the wrong advice because it is not clear, what chance does a contractor have who just wants to carry out sensible financial planning and get on with the job?”

Business Advice invited HMRC to comment on the claims. A spokesperson said frontline staff had received up-to-date guidance on travel and subsistence expenses.

“Rules for travel and subsistence expenses for workers engaged through employment intermediaries were introduced from 6 April 2016. The rules put people who work through intermediaries such as agencies and ‘own companies’ in the same position as other employees,” the spokesperson said.

HMRC’s use of the Employment Status Service (ESS) – the online IR35 advice tool – has also received criticism from legal experts who claimed it was not legally binding.

Business Advice previously revealed that ESS could be enabling tax avoidance.

In response to fears that the added administrative burden of IR35 could see contractors and freelancers abandon the public sector, HMRC claimed it had “yet to see any cause for concern”.

For further IR35 advice, don’t miss our ten IR35 risks all contractors need to be aware of

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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