HMRC clarifies position on Off-Payroll contract “blanket rulings”

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HMRC clarifies position on the Off-Payroll contract “blanket rulings”

HMRC has told their IR35 forum that so-called “blanket” IR35 assessments by clients are acceptable under the Off-Payroll rules, provided the client reviews at least one contract.

“Blanket” assessment refers to applying the same IR35 decision to multiple limited contactors, if they are engaged under exactly the same terms and conditions.  The latest IR35 forum meeting allowed HMRC to clarify their previously inconsistent stance on blanketing, putting beyond doubt that they will accept IR35 determinations made in bulk.

The Revenue also clarified that clients cannot simply treat all limited company contractors as “inside IR35”, and must review contractual terms in addition to actual working practices in order to determine whether PAYE must be deducted from the contract rate or not.  Worryingly, they indicated that a number of Public Sector Bodies (PSBs) had been found applying PAYE to all contractors regardless of the nature of the engagement since the introduction of Off-Payroll, confirming anecdotal reports of this practice, but said they had challenged the public authorities concerned, providing education and support where necessary.

The IR35 forum was launched following a review of small business taxation in 2011, allowing HMRC to evaluate regulatory changes by meeting quarterly with professional and industry bodies such as the CIOT, ICEAW, CBI and IoD.

There had been concerns previously that blanket treatment of similar contracts would breach a clause in the Off-Payroll legislation that obliges clients to take “reasonable care” when making IR35 assessments.  This was quashed by HMRC in last May’s IR35 forum meeting: “treating people in the same factual position in the same way meets the statutory obligation to use reasonable care”.

This was reinforced in the recent November meeting: “having reviewed one contract, an engager may consider that identical facts and terms and conditions apply to other contracts, and it is then not necessary to review every individual engagement separately. Forum members agreed it would be helpful to clearly minute this to enable them to rebut future allegations.”

The development has significant implications given the planned extension of Off-Payroll to the private sector in 2020.

Other issues discussed at the meeting were the importance of HMRC to consider where liability falls in the case of end-client inaccuracies, concerns about non-compliant umbrella companies, guidance for how clients should account for Off-Payroll and disclosure of figures that show the troubled online CEST tool has been used 750,000 times to date, monthly use has settled to around 50,000 per month and approximately 60% of all CEST determinations have given a “self-employed” result.

30th January 2019.

Sources:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/722315/IR35_Forum_minutes_and_appendix_1_10_May_2018.pdf

https://www.gov.uk/government/groups/ir35-forum

https://www.contractoruk.com/news/0013953hmrc_endorses_ir35_blanketing_back_single_contract.html

https://www.contractoruk.com/news/0013687blanket_ir35_decisions_win_taxmans_tentative_approval.html

https://www.contractoruk.com/news/0013511blanket_ir35_decisions_face_mp_scrutiny_qc.html