HMRC are struggling to apply the rules of IR35

Designed to ensure fairness but even HMRC are struggling to apply the rules resulting in IR35 becoming a bit of celebrity at the moment. Much like a popular Saturday night game show, you win some and lose some, the exception here is that it is the players that are the celebrities.

The legislation is receiving much of a public airing at the moment and this has resulted in confusion and hysteria which as a result, people won’t take matters seriously.  ‘If HMRC cannot apply the rules then why should we even bother’ I hear. However, ignoring whether the rules may impact you and your business is the wildcard within this game show and as we all know, you could win a lot, but lose everything.

Recent cases against TV Presenters

The recent cases with Kay Adams and Christa Ackroyd, whilst focused on presenters which many may feel is detached from their situation, these cases do provide us with lessons of HMRC’s approach and the emphasis given to certain areas of the rules.

For example, whilst Christa Ackroyd lost her appeal, on review of her case, her role was under much control, she had extras such as a clothing allowance and almost all of her work and income was from the BBC.  Not to mention she had lengthy contracts in place and had to get permission to work elsewhere.

Kay Adams however, was successful in her appeal; in control of her role on Loose Women, writing her scripts and dictating how the show played out, she also had only 1 year contracts, multiple sources of income and no pay when she was unable to present due to family commitments.

Supporting this was Lorraine Kelly’s victory against the BBC which focused on the importance of control, together with there being no guarantee of work, no paid holidays and sick pay, and Lorraine having multiple sources of income.  The outcome of Lorraine’s case also further highlights the questionable HMRC CEST tool and its reliability.

Whilst famous names continue to battle with HMRC as it is announced HMRC blitz BBC presenters with tax demands, in the background, the public sector is within the regime, guilty until proven innocent, they are responsible for ensuring the rules are applied correctly to all contractors.  Not only do businesses need to ensure those Limited Companies are dealt with correctly, but also businesses should review the employment status of sole trader contractors.

What does this mean for private sector businesses?

With all this to come into force in April 2020 for the private sector, there will be appeals to delay this due to HMRC’s apparent inability to apply the rules. However, as it stands the private sector looks likely to be hit.

Not only do businesses need to be concerned by IR35 and employment status in general, but businesses have also been made aware of a third person within their workforce they need to be mindful of; the worker.  We now have a hybrid sole-trader/employee for legal purposes only.  Those seemingly in business on their own account and not on the payroll could still have legal rights to things such as sickness and holiday pay as high profile cases like the Pimlico Plumbers and Uber demonstrate.

Business owners may feel as in control as turning the spinning wheel in each great family game show when it comes to knowing what action to take; how much time and money do they invest and does anyone really know the best advice?

How can we help?

Here at Ellacotts, our specialist tax team keep fully up to date in this area and regularly undertake workforce assessments to explain where businesses are at risk, from both the personal service company’s perspective and the Intermediary business, which may have a varied workforce.  By applying the rules as they stand and putting sensible measures in place, we can ensure you are doing all you can to comply with the rules and are acting in the spirit of the law.

If you feel you may be affected by IR35 and the associated rules and changes then do get in touch with Ann Bibby on abibby@ellacotts.co.uk or 01295 250401 to arrange a meeting to discuss your position.