Date: 29 June 2011
Location: Room GE/01, 100 Parliament Street
Time: 11am to 1.30pm
Sam Mitha (HMRC Policy) (Chair)
Chris Bryce (Professional Contractors Group)
Kate Cottrell (IR35 Specialist)
Gillian Econopouly (Recruitment and Employment Confederation)
Martin Hesketh (Freelancer & Contractor Services Association
Samantha Hurley (The Association of Professional Staffing Companies)
Simon McVicker (Professional Contractors Group)
Anita Monteith (ICAEW)
Mike Brown (HMRC Operational)
Graeme Conlon (HMRC Technical)
Philip Lloyd (HMRC Operational)
Robin Wythes (HMRC Policy)
Phil Hogan (HMRC Policy)
Matthew Brown (CIOT)
Priyen Patel (Federation of Small Business)
Anne Redston (IR35 Specialist)
Chas Roy-Chowdhury (Association of Chartered Certified Accountants)
HMRC thanked the attendees for attending and welcomed the Freelancer & Contractor Services Association, the Association of Chartered Certified Accountants, the PCG's permanent representative, Simon McVicker, to the IR35 Forum.
One action point asked members to provide specific examples of HMRC reviews being targeted inappropriately at sectors or geographically, and another asked members to refer to HMRC specific current IR35 cases that are old (18 months). Although HMRC had yet to receive any details in respect of either of the action points they would be pleased to receive such information if it comes to notice.
The other two action points fell on HMRC to feedback to the Forum. HMRC advised that draft guidance and outline ‘gateway' test is work in progress. The feasibility of providing an audit trail for phone calls to the Helpline is covered below.
To form the basis for discussion, HMRC circulated a document of the proposed way forward on HMRC's IR35 organisational design and operational strategy. It was agreed that as the document is in development it would not be circulated beyond the Forum. The organisational design and strategy is based on customer risk segmentation with an emphasis on help and support to low-medium risk cases and targeted compliance activity against high risk cases. The aspects of the document are covered below.
HMRC reiterated that the function of the Helpline is in purely a customer service capacity and confirmed that contact to the helpline would not initiate any compliance activity.
HMRC said that it was possible to create an audit trail of calls and that there was already a database of calls made to the helpline in existence. It currently recorded the date, time and briefly, the general advice given to the caller. It would be possible for a caller to the helpline to be given a reference number by HMRC which the caller could subsequently quote as proof of their contact with the HMRC helpline.
There was discussion regarding the precise role of the Helpline and the extent to which callers can rely on advice given. HMRC said that the IR35 helpline could not provide certainty on a contract from phone contact alone. Indeed there was a consensus at the meeting that the helpline could only in reality provide generic advice. Where there is a request for an HMRC opinion, HMRC would ask whether the caller was content for their client to be contacted. If the caller was not, HMRC would not pursue the matter.
HMRC reiterated that the helpline was purely in place as a customer service, and confirmed that there would be no approach by HMRC to the caller's client without the caller's consent. It was suggested that at the start of every call the Helpline should emphasise to the caller that the service was being provided purely in an advisory capacity and would not be used for compliance activity.
There was a short discussion about the merit of the helpline asking what sector the caller was working in. The general view was that capturing this information would be advantageous in establishing an overall picture of where there is uncertainty or concern. It was noted, however, that where the trade or profession was relevant to address the question being put to the Helpline then this information would be obtained as a matter of course.
HMRC will report further to the Forum on the helpline at the next meeting.
HMRC said that consideration was being given to the establishment of such a team as an initiative to help and educate employers, end clients and Employment Businesses (i.e. those engaging/placing individuals providing their services through intermediaries). HMRC already provided this type service more widely.
It was stated, for example, that employers were being advised to engage their workers via a company in circumstances where there was little regard to the obligations of such arrangements would place on the workers. Neither the employer nor the worker seemed to be aware that there might be IR35 implications.
Forum members agreed that in developing business education support it will be necessary to have regard to the size and the nature of engagers as this will influence the nature of the education provided.
There was reference to the need for employers to understand that the interposition of an intermediary did not necessarily obviate their responsibilities under the employment rights legislation. HMRC said that it could not provide publish guidance on anything other than issues for which it had statutory responsibility.
HMRC said that there was a need to be able to address wider low level risk by use of interventions other than traditional IR35 Reviews. HMRC described the role of this proposed Unit and how it might operate. If, for example, it was identified that there was a particular sector where there might be a problem about understanding IR35, HMRC could write to the parties involved informing them of the requirements of IR35 and where to get further advice. This could be backed up by providing additional publicity via the sector's representative bodies.
It was suggested that before targeted letters are issued, general guidance should be published. The view was expressed that HMRC needs to review its guidance which some feel is inadequate. HMRC committed to reviewing its guidance but emphasised that if there are perceived inadequacies, it is important that specific problems are brought to HMRC's attention.
HMRC explained that these teams would be responsible for compliance reviews of high risk cases. The IR35 teams would follow (as they do now) the same approach to compliance activity as in other areas to ensure consistency of practice. HMRC said that it welcomed feedback on their current operational compliance activity. It was obviously important that those who might be affected knew as soon as possible if IR35 was potentially applicable.
HMRC acknowledged that where a full compliance review is undertaken, the focus should be on concluding the review as quickly as possible. This is important both to minimise disruption to the taxpayer and to make the most effective use of HMRC's resources. HMRC is reviewing how compliance reviews are conducted and agreed that it was not acceptable for large numbers of questions to be automatically asked in every intervention.
HMRC were told that decisions on IR35 cases appeared to take a very long time. HMRC said that it had an interest in getting cases settled without delay, but it could only do this if it could obtain the necessary facts. Peculiar to IR35, as opposed to general status cases was the need to obtain facts from the end client. Improved guidance would hopefully speed up the resolution of such reviews by promoting transparency of process.
It was agreed that there are a number of detailed issues regarding how HMRC undertakes compliance activity and how it reaches decisions which will need to be explored as part of developing improvements in the way IR35 is administered.
HMRC explained that it was content to share details of its broad
risk strategy but would not be able to share details of its specific
risk profiling. HMRC further explained that its initial risk assessment
eliminated certain kinds of cases, and that it critically assessed
the rest before deciding if further action was necessary.
HMRC acknowledged that in the early years of IR35 it had adopted
less refined selection criteria than used now. Processes for selecting
IR35 cases had been improved. The proposed new strategy whereby
low-mid risk would be addressed through interventions other than
compliance reviews, should address the current position where
because the only principal type of intervention is a review, lower
risk cases have been the subject of a compliance review.
HMRC said that it had a lot to consider in taking a more holistic view of their risk analysis and developing their operational strategy and will provide an update at the next meeting.
Forum members said that if HMRC wants feedback before the next Forum meeting on a restricted confidential basis, that they were welcome to approach them.
It was agreed that HMRC would take the views of other stakeholders separately on behalf of the IR35 Forum and that those views would be shared with the Forum members.
HMRC asked Forum members for their view on HMRC's current guidance on IR35, i.e. what it currently did well and what we didn't do so well - identifying gaps in the guidance accordingly.
14 September 2011 (11am to 1.30pm) at 100 Parliament Street
