IR35 update – HMRC provides clarity on change in reported status – plus new CEST tool coming

First published on 28 October 2019 by Alastair
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We were pleased to note that one of our professional institutions, the Association of Taxation Technicians (ATT), has welcomed the clarity recently provided by HMRC about off-payroll working, specifically regarding when a change in a worker’s reported status from April 2020 might trigger an enquiry into their tax affairs from earlier years.

HMRC’s policy paper (dated 22nd October 2019), states they will only use the information they receive following the changes to open an enquiry if they have reason to suspect fraud or other criminal behaviour. 

The ATT’s view is that without the assurance contained in the policy paper, contractors could be concerned that if their status changes after April 2020, HMRC might consider that reason enough to make further investigations, with a view to clawing back additional tax for the previous years. HMRC’s clarification ought to reduce the risk of retrospective enquiries.

M&S Accountancy & Taxation’s view is that some common sense has been applied by HMRC here and, although not giving complete certainty to contractors and others potentially operating under the provisions of IR35, it will be reassuring for the overwhelming majority who have not been engaging in fraud or criminal behaviour.  The next big step will be the ‘improved’ CEST (Check Employment Status Toolkit) which HMRC has promised by the end of the year. If this can remove the inherent bias of the current tool then that will be a huge help in providing the certainty that contractors seek. Until this is issued, our advice remains NOT to use the toolkit as a means of determining status.

Stewart McKinnon, Director, M&S Accountancy & Taxation

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