The headline IR35 news stories from 2021
After COVID, there was only one thing that dominated the news for those in the contractor supply chain this year and that was IR35. The reform of the off-payroll working rules had been a long time coming but finally came into force in April this year. We’ve spent a long time getting ready for this – making our contractors aware of what was coming, working with partners like recruiters to support them, and finding ways to help end clients meet their new responsibilities under the act while still continuing to attract top contracting talent. Here we take a look back at the year in IR35 – just in case there are any stories you might have missed.
DWP hit with huge tax bill
One of the biggest stories of the summer was that government body the Department of Work and Pensions (DWP) had fallen foul of IR35 rules. Following a review opened by HMRC about the employment status of its contractors, the DWP was issued a tax bill of £87.9 million in unpaid tax and National Insurance. Legislation putting the responsibility for status determinations on the end client has applied in the public sector since 2017. The DWP argued that it had used HMRC’s own CEST (Check Employment Status for Tax) tool to reach the outside IR35 status determinations, once again exposing the risks of relying on an incomplete and unsophisticated tool. However, the DWP were excused from having to pay any penalty fees, which our expert Andy Vessey thinks highlights “the very subjective nature of IR35”. Find out more about the ruling.
And the Home Office too…
In another sign that HMRC were chasing large sums of money this year, the Home Office were also found to owe £29.5 million worth of tax and National Insurance liabilities due to “incorrect assessment of contractors under IR35”. The Home Office were also slapped on the wrist with a £4 million fine, though this was suspended, meaning the penalty will be wiped if the Home Office can prove that they have fixed the systems or processes that led to the initial errors.
There was a tight timescale for this though – HMRC wanted the problems rectified in 3 months, advising several improvements including “improved training of hiring managers and improved monitoring and assurance over compliance with IR35, not just at the point of procurement but throughout the contract life-cycle”. The Home Office ruling highlighted that IR35 is not just something that you can pay attention to at the beginning of a contract and then forget about – your compliance processes need to be holistic and ongoing. Find out more about this key news story here.
…and HM Courts and Tribunal Service
Another day, another government department, another IR35 investigation ending with a hefty chunk of unpaid tax and National Insurance. In August, accounts for HM Courts and Tribunal Service revealed that they had been challenged by HMRC to “revisit employment status determinations for off-payroll workers engaged between 6 April 2017 and 5 April 2020, where we had previously concluded workers were operating outside of the off-payroll working rules”. Our IR35 expert Ryan Dawson said that this latest ruling showed that “the HMRC CEST tool and guidance is not fit for purpose and undeniably throws uncertainty over the accuracy of assessments both made in the past and those in the future.” Read the full story here. Andy Vessey also took a deep dive into the details of these three cases, and the role that CEST played in the incorrect determinations of the workers.
IR35 compliance checks start in the private sector
In September, not even a full 6 months after the introduction of the new off-payroll working rules, we got word that HMRC had already started compliance checks against the updated regulations. It seemed that the oil and gas and finance industries were in HMRC’s sights, with many businesses in those sectors reportedly receiving communications from HMRC inquiring about their process of hiring contractors. It should be stressed that these were not formal investigations or enquiries, but might still be worrying for end clients on the receiving end. Kingsbridge’s specialist IR35 team can help with consultancy support and act as an advisor, dealing with HMRC on behalf of end clients. Find out more about the compliance checks in our news story.
Call the ref – PGMOL vs HMRC
Another high profile client battling HMRC in 2021 was PGMOL, the group providing match officials for Premier League, the Football Association and the English Football League (EFL). This saga has been dragging on into extra time – the First-Tier Tribunal was held in 2018, there was an Upper Tribunal in 2020 and an appeal by HMRC this year has seen the case sent back to tribunal stage. Real end-to-end stuff! The complexity and ongoing nature of this case highlight HMRC’s determination to pursue action and the need for businesses to make sure that they have robust IR35 compliance processes in place.
Kingsbridge can help your IR35 compliance in 2022
These stories – and the fact that so many government departments themselves have fallen foul of IR35 rules – show that the rules are complex and compliance needs to be watertight. Kingsbridge provides a whole range of IR35 options, including our unique hybrid Kingsbridge Status Tool, our IR35 Protect insurance which flexes to cover whoever HMRC deems liable in an investigation and our specialist IR35 consultancy services. Recruitment businesses and end clients can head to our partnerships page to find out more about how we can help support your business.