IR35 presentation from Qdos Contractor CEO Seb Maley. Taken from iContract's IR35 Workshop Evening. Find out about future iContract events by e-mailing info@icontract.co.uk

1. IR35
SEB MALEY, QDOS CONTRACTOR

2. ABOUT QDOS
• Founded in 1988
• Tax and insurance specialists
• One of the UK’s leading IR35 experts
• 76,000 limited company contractor clients
• Successfully defended over 1,600 IR35 cases

3. IR35 BACKGROUND
• Introduced April 2000
• Tackle misuse of ‘personal service companies’ (PSCs)
• Workers who act like employees should be taxed as such
• “Friday to Monday” scenario

4. IR35 EARLY YEARS
• High levels of compliance activity
• Focus on IT sector
• HMRC yielded £1m+ each year
• Lack of resources caused drop in enquiries

5. IR35 ENQUIRY NUMBERS
0
200
400
600
800
1000
1200
1400
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

6. IR35 RECENT YEARS
• Four specialist IR35 teams
• Targeting 200+ enquiries a year
• ‘Improved’ approach to enquiries
• Aim to close cases faster

7. IR35 – PUBLIC SECTOR CHANGES
• February 2012: Ed Lester, CEO of The Student Loans Company
• Avoiding £40k per year
• Huge amount of mainstream press interest
• ‘Assurance process’ in August 2012
• IR35 ‘discussion document’ in July 2015

8. OFF PAYROLL CONSULTATION
• May 2016
• Focused on ‘off payroll’ engagements in the public sector
• Moving responsibility to ‘fee payer’
• Fee payer to deduct PAYE/NIC before paying PSC
• HMRC to build a ‘new interactive online tool’
• Consultation ended 18th August

9. DRAFT LEGISLATION
• Released 5th December 2016
• Switched onus on status determination to public sector body
• Fee payer still liable if decision incorrect
• Public sector body to advise fee payer of determination within 30 days

10. IMMEDIATE IMPACT
• Confusion, panic and a lack of consistency
• Some blanket ‘inside IR35’ determinations
• Some bodies increasing rates to retain workers
• Contractors leaving public sector
• U-turns

11. CONTRACTOR REACTION
• 85% would leave the public sector if their status was changed
• 95% believed public sector projects would suffer
• 80% did not believe their clients were ready for the reform

12. EDUCATION PROCESS
• The determining factors around IR35 will not change
• All case law still applies and enquiries will be determined on same basis.
• 99.81% of cases we have handled were found to be ‘outside’ IR35
• Determinations must be done on a case by case basis – every situation is
different

13. FINAL LEGISLATION
• Finance Bill released 20th March 2017
• Reasonable care
• Quicker determinations – on or before contract starts
• Agency can question reasons for a determination and public sector body
must respond within 31 days

14. HMRC TOOL
• Employment Status Service (ESS)
• Made public on 2nd March
• Continued adjustments
• Discrepancies between case law and tool results
• Not mandatory

15. HMRC TOOL
“HMRC will stand by the result given.”

16. HMRC TOOL
“HMRC will stand by the result given unless a compliance check finds the
information provided isn't accurate.”

17. HMRC TOOL
“HMRC will stand by the result given unless a compliance check finds the
information provided isn't accurate.
HMRC won't stand by results achieved through contrived arrangements
designed to get a particular outcome from the service. This would be treated
as evidence of deliberate non-compliance with associated higher penalties.
HMRC can review your taxes for up to 20 years.”

18. WHERE WE ARE NOW
• Significant numbers of contractors left public sector
• Things starting to stabilise
• NHS U-turn
• Compliance activity starting
• Questionable ‘schemes’ appearing

19. THE FUTURE
• Reform in the private sector
• “Early indications are that public sector compliance is increasing as a
result, and therefore a possible next step would be to extend the reforms to
the private sector, to ensure individuals who effectively work as employees
are taxed as employees even if they choose to structure their work through
a company.”
• Likely to be April 2019