Even the court service can't get IR35 right

[vetran]

https://www.theregister.com/2021/08/..._service_ir35/

Her Majesty's Courts & Tribunal Service has been forced to pay the UK taxman £12.5m due to incorrect assessments regarding the employment status of contractors under controversial IR35 rules.

Disclosed in the court service's annual report [PDF], the payments were a result of a challenge from Her Majesty's Revenue & Customs (HMRC) to the Ministry of Justice's handling of IR35 rules between 6 April 2017 and 5 April 2020, which had concluded workers were operating outside of the off-payroll working rules.

Under IR35, contractors, many of whom work in IT, that are "deemed employees" by HMRC need to pay income tax and National Insurance as though they are employees but are not entitled to benefits such as holiday or sick pay.
....
In this case, the court service workers seem to have been miscategorised because of its use of the HMRC's Check Employment Status Tool (CEST), according to Seb Maley, CEO of Qdos, an advisory firm for contractors.

He pointed out that the Department of Work and Pensions had admitted an £87.9m IR35 liability and the Home Office paid £33.5m under similar circumstances.

"Given that HMRC's fundamentally flawed CEST was used to decide the IR35 status of contract workers, I'm not in the least bit surprised that mistakes have been made," he said.

[lorakeen]

shambles, shambles everywhere

[NotAllThere]

They should appeal. Take it to the supreme court.

[Andy2]

what a shambles. I see a pattern here
It seems many govt departments are paying hmrc for incorrect assessment of ir35.

[ladymuck]

what a shambles. I see a pattern here
It seems many govt departments are paying hmrc for incorrect assessment of ir35.

Yep it's a quick and easy win - doesn't generate any new income for HMT (although I bet HMRC will claim it as such) but does give HMRC something to show as 'proof' that there's a lot of tax dodging going on. Never mind that some of the assessments were done using HMRC's own toolset (the tools were used incorrectly, rather than their tools being flawed, I'm sure).

It's also a shot over the bows for the private sector of what's to come and will drive ever more risk adverse behaviours with ever more demands for the contractor to indemnify the fee payers even though it's the clients where the buck should stop for an incorrect determination.

[DaveB]

It's gong to be interesting when we get the result of the PGMOL appeal. If HMRC lose that one, and it looks like they will, then CEST is sunk as it would overturn HMRC's view that MOO exists by default. If that happens then thousands of results could be challenged as MOO is baked into CEST as an assumption.

[SueEllen]

Yep it's a quick and easy win - doesn't generate any new income for HMT (although I bet HMRC will claim it as such) but does give HMRC something to show as 'proof' that there's a lot of tax dodging going on. Never mind that some of the assessments were done using HMRC's own toolset (the tools were used incorrectly, rather than their tools being flawed, I'm sure).

I'm forgetting which government department HMRC haven't gone after. Didn't they have to do themselves?

[vetran]

It's gong to be interesting when we get the result of the PGMOL appeal. If HMRC lose that one, and it looks like they will, then CEST is sunk as it would overturn HMRC's view that MOO exists by default. If that happens then thousands of results could be challenged as MOO is baked into CEST as an assumption.

We can but hope, if the Judge can rule / suggest that the CEST where correctly completed should be binding then HMRC would be in trouble.

Maybe they could produce some decent rules.

[DaveB]

We can but hope, if the Judge can rule / suggest that the CEST where correctly completed should be binding then HMRC would be in trouble.

Maybe they could produce some decent rules.

It's not really about CEST being binding, it's about it being fundamentally flawed and not fit for purpose.

The PGMOL case hinges on HMRC's assumption that MOO exists by default in every contract. Thats why the CEST doesn't include it.
They lost on that point in the UTT and appealed. If they lose again the entire premise of their assessments is undermined.

https://www.judiciary.uk/publication...officials-ltd/

[vetran]

It's not really about CEST being binding, it's about it being fundamentally flawed and not fit for purpose.

The PGMOL case hinges on HMRC's assumption that MOO exists by default in every contract. Thats why the CEST doesn't include it.
They lost on that point in the UTT and appealed. If they lose again the entire premise of their assessments is undermined.

https://www.judiciary.uk/publication...officials-ltd/

Oh I agree this case isn't but CEST needs to be binding if it is to be successful. The key thing business needs is certainty not random tax bills based on opinion.