HMRC may struggle with new IR35 enforcement policy

The Head of Policy at the Recruitment and Employment Confederation (REC) said that \”With a further 15 per cent cut already planned to their budget, it seems highly unlikely that the HM Revenue & Customs will be able to provide the added scrutiny that would be required if IR35 were simply left in its current state, as the OTS has proposed. If they cannot say how much the tax brings in, or how much it costs to enforce, how can there be any confidence that HMRC can step up their game and turn around this failing system? They are clearly already struggling under a heavy workload, which the Treasury should be looking to relieve rather than add to. Both other options given by the OTS for IR35 reform – either suspending it altogether, or creating a clearer business test to automatically exempt large numbers of freelancers from the system – are far more workable, sensible solutions for this long-running problem that would allow HMRC to focus its resources more effectively.\”

As well as asking the HM Revenue and Customs to improve the enforcement of the existing IR35 rules he will also be heaping new ‘disguised remuneration’ policies on them over the course of the next year. The Chartered Institute of Taxation (CIOT) recently said that “we foresee that many employers will need to approach HMRC to determine whether or not their current arrangements are affected by the new rules. We remain concerned that if discretion is left to HMRC to decide what arrangements are the right side of the line, and which are not then the position, will always be uncertain and subject to a change of HMRC view”. The new rules for disguised remuneration will add to the HMRC workload at a time when they are already under immense pressure.

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