Recent Tribunal decision highlights complexities of IR35

Recent Tribunal decision highlights complexities of IR35

A recent Tribunal decision highlights the complexities of IR35, which, in light of recent developments, is not always as straightforward as HM Revenue & Customs’ (HMRC) Check Employment Status for Tax (CEST) tool.

In the case of limited company contractor Mark Daniels (MDCM Ltd) versus HMRC, Mr Daniels won his IR35 appeal by overcoming three status factors that all went against him.

Perhaps most notably, it was clear from the evidence put forward that STL (the end client) ‘directed’ Mr Daniels’ duties during his hours of work as a night shift manager.

On top of this, Mr Daniels was not formally integrated into STL’s organisation and there was no notice period between Mr Daniels and the company in the event either party decided to terminate his contract. Furthermore, Mr Daniels was paid a fixed daily rate for the work he carried out for the company.

In contrast to a typical IR35 inquiry, the Tribunal found that Mr Daniels was “not controlled any more than any other contractor” despite STL dictating his work.

It also noted that the fixed daily rate he was paid pointed “towards Mr Daniels being self-employed” and that the fact he had “no entitlement to any employee benefits” was “inconsistent with [traditional] employment.”

These comments come as somewhat of a surprise, as a typical IR35 inquiry would usually find that neither being paid a daily rate nor having a lack of entitlement to employment benefits, would have much of a bearing on an IR35 decision.

The Tribunal’s decision came even despite the fact that MCDM was unable to provide a substitute – and that the end client had confirmed at the hearing that a substitute would not be accepted.

In its decision, the Tribunal made reference to the case of Hall V Lorimer, where a Judge had previously noted that determining whether or not a person is genuine in business “is not a mechanical exercise of running through items on a checklist…The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered qualitative appreciation of the whole.”

In light of this, commentators have been keen to note that the case provides a direct contradiction to the logic behind HMRC’s CEST tool, which uses simple “checklist” style questions to determine contractors’ IR35 statuses.

Given the case law cited and some of the surprising revelations throughout the case, experts have stressed that the CEST tool is simply not fit for purpose – as a contractors’ circumstances can often be just as complex and unique as Mr Daniels’.

The comments come just weeks after a BBC Select Committee hearing revealed that some 97 per cent of BBC broadcasters who had used the CEST tool for help in determining their employment status had been ‘failed’ by the system.

Critics continue to voice concerns that HMRC has ignored the ‘wealth of case law’ which ought to be utilised when delivering any important decisions in relation to IR35.

Employers hoping to recruit more contractors and freelancers ahead of Brexit

General uncertainty surrounding Britain’s upcoming departure from the European Union (EU) has inspired employers to target more contractors and freelancers as opposed to permanent staff when recruiting fresh talent, a new survey reveals.

According to the latest JobsOutlook survey carried out by the Recruitment and Employment Confederation (REC), employers are taking a more ‘cautious’ approach to recruitment amid concerns over the impact Brexit might have on Britain’s business landscape.

Specifically, many businesses are turning towards contractors and freelancers in a bid to plug skills gaps in their organisations, as opposed to recruiting permanent or long-term employees.

Upon surveying 600 UK employers, the research found that almost a quarter (22 per cent) of companies that already provide work to contractors are hoping to recruit more in the coming four to 12 months.

In comparison, only 17 per cent of respondents said that they had plans to recruit more permanent members of staff in that same timeframe.

Commenting on the data, Tom Hadley, Director of Policy at the REC, said: “Employers are potentially turning to temps, which could bring opportunities to candidates interested in temporary work and the flexibility it affords, but is also a sign employers are affected by economic and political uncertainty.”

Is HMRC planning on using robots to check tax returns?

In recent weeks, it has emerged that HM Revenue & Customs (HMRC) is investigating new ways in which robotics and artificial intelligence (AI) could be used to check the accuracy of tax returns.

Brigid McBride, Digital Transformation Director at HMRC, has indicated that the tax authority is experimenting with new and innovative ways in which the latest technology can be implemented into its existing systems.

Speaking at a recent IT conference in London, Ms McBride revealed that HMRC had been “dipping its toe” in AI with a view to improving efficiency and determining how robotics and AI might be able to assist with “compliance and complex tax cases.”

Ms McBride also confirmed that HMRC had so far been successful in using “simple robotics technology” in the form of “a virtual assistant called Rita.”

“We use a lot of new channels like social media to help deal with simple queries,” she said.

“The pace of change is not slowing, the demands of our customers are growing, and our customers are moving towards self-employment.

“The real challenge is building an organisation that can absorb that change and adapt to it,” she said.

At the conference, Ms McBride indicated that the tax authority hoped to automate as many as 10 million of its processes by the end of 2018.

Contractors responsible for substantial growth in self-employment, study finds

A new study carried out by the Association of Independent Professionals and the Self-Employed (IPSE) using data from the Office for National Statistics (ONS) has yielded some interesting findings.

According to the research, the UK’s self-employment sector has grown significantly over the past decade. Interestingly, however, the key driver behind this growth has been a sharp increase in the number of people turning towards highly-skilled contracting and freelancing roles, as opposed to increases in the number of small, entrepreneur-led businesses or ‘gig economy’ workers.

The figures reveal that an astonishing 4.4 million of all Britons who identify as ‘self-employed’ work completely alone and do not oversee any employees.

Meanwhile approximately half of these workers are freelancers and contractors who enjoy highly-skilled professional and technical occupations, the report reveals.

IPSE’s research suggests that the majority of the UK’s freelancers work in artistic, literary and media occupations, such as graphic design.

Meanwhile, 14 per cent work as either teaching or education professionals, or as functional managers and directors – while an additional five per cent work in IT and telecommunications.

In total, the figures reveal that the contracting and freelancing community has grown by 46 per cent since 2008 – outstripping the pace of growth in the wider self-employment sector as a whole, which has grown by 34 per cent in comparison.

Commenting on the good news, Chris Bryce, Chief Executive of IPSE, said: “The report goes a long way to dispelling the myth that activity in the self-employment sector is occurring mainly in the ‘platform’ or ‘gig’ economies, when the real growth is in highly-skilled freelancer occupations.

“People value flexibility, which is one reason why more people than ever before are moving into freelancing and taking the opportunity to fit their work around their lives,” he said.

And finally…

For a small sum of just £6.7 million, high-end travellers will be able to stay at the world’s first ‘luxury hotel in space’ from the year 2022 onwards, it has been revealed.

During the Space 2.0 summit in California last month, astronomers and developers unveiled the hotly-anticipated Aurora Station project, which will open in 2021 and host its first guests the following year.

Wealthy tourists looking for an intergalactic getaway will be able to visit a floating hotel high above the earth’s atmosphere in groups of four, accompanied by two crew members who will take care of the more technical aspects of their 12-day stay.

Visitors will be able to enjoy sea, land and space views from their room. The hotel also offers state-of-art amenities, such as zero-gravity virtual reality (VR) games and high-speed WiFi –so visitors won’t have to wait until they get home to upload their space-age holiday snaps to Facebook.

Frank Bunger, CEO and founder of Orion Span, the team behind Aurora Station, said that the project would help to bring “travellers into space quicker and at a lower price point than ever seen before.”

Interested parties ought to get in touch with Mr Bunger and his associates ASAP, as demand is strong and a £57,000 deposit is required to secure an advance booking!