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FCSA members get sneak preview of HMRC’s IR35 online digital tool

‘More work to be done’ is the overall message FCSA members have sent to HMRC following a preliminary demonstration of HMRC’s new online digital tool.   As Government presses ahead to implement IR35 reforms in the public sector in April 2017, HMRC has been developing a new online tool designed to provide reassurance and a “safe harbour” around IR35 status.

The tool is currently at the alpha prototype stage and a private beta launch is scheduled for January with a public beta launch planned for February.  HMRC has designed the tool to be used by contractors, agencies or hirers to provide a definitive document to prove that a contractor is working according to IR35 rules, assuming that the questions are answered honestly.  However, FCSA believes that the tool is likely to cause some consternation particularly around mutuality of obligation, which is assumed to be present by virtue of the fact that the tool is being used, given that a contract for services is, or will be, in place.

Commenting on behalf of FCSA members, who provide professional support services to some 120,000 contractors, Julia Kermode, FCSA’s chief executive said: “We welcomed the opportunity to catch a first glimpse of HMRC’s digital tool but it is clear that the tool has some way to go before it will be ready for use.  The tool has been designed to reflect HMRC’s view of IR35 status according to the information supplied, but of course that doesn’t mean that HMRC’s view is correct should an IR35 case go to tribunal.

“Using the tool will be optional, and different parties might achieve different results for the same assignment depending on their perception and how they answer the questions.  Ultimately it will be down to the party that has the tax liability to decide the IR35 status of a contractor, regardless of the tool outcome.  We remain concerned that the supply chain will seek to minimise liability by deeming all contractors caught by IR35, or that end-clients will choose not to engage contractors through their personal service company.

“It is hugely disappointing that the proposed IR35 changes are set to be implemented, despite the very significant opposition from all parties that responded to the recent consultation.  Once again, Government policy makers have clearly not listened to the sector’s concerns and are pressing ahead with something that is simply not fit for purpose.”