IR35: HMRC research into making clients responsible for compliance.
HMRC have undertaken research to understand how employers would react if made responsible for operating IR35 on behalf of their contractors. HMRC are keen to level the playing field between employees and those who use a limited company to work in a similar manner, as they believe non-compliance with IR35 is widespread. They are looking for evidence of how employers engage workers through personal service companies and what the effect of changing the rules would be.
The results show that, unsurprisingly, employers were not supportive of the proposal to shift responsibility to them. They are concerned it will reduce flexibility in the work force, as well as being costly and administratively burdensome. HMRC has suggested IR35 could be tested by looking at the areas of supervision, direction and control. Employers felt this was impractical, and suggested better measures might be duration, intensity, exclusivity and financial responsibility. Most were concerned they would end up with a financial penalty for non-compliance, potentially leading to reducing the number of contractors they might be willing to engage.