HMRC’s latest briefing notes on the changes to off-Payroll working rules contain a statement which the optimistic and trusting contractor will feel is a positive one whilst his or her more pessimistic and less- trusting colleague may feel the need to remain wary about.
The statement published on 22 October included this paragraph:
HMRC have taken the decision that they will only use information resulting from these changes (the off-payroll working rules) to open a new enquiry into earlier years if there is reason to suspect fraud or criminal behaviour.
At first glance this appears to provide comfort for any PSC contractors who have hitherto regarded themselves as being outside IR35 but who may find that an up to date status determination by an end client finds them to be inside. The statement suggests that no enquiry into the employment status of any earlier tax years will be made providing that there is no suspicion of fraud or criminal behaviour involved.
Can HMRC be trusted to play by the rules?
The statement has no force in law – the approach is not part of the tax legislation but should serve as a notice of intent. Unfortunately the contracting industry knows to its cost that HMRC does not always play by the rules when it doesn’t suit.
The Loan Charge is a classic case in point when HMRC drove a coach and horses through long-established principles of time limits by going back to 1998 in pursuit of liabilities. Although there are arguments on both sides in that example there clearly remains an element of mistrust in HMRC’s motives.
A word of warning
If HMRC are sincere in their intentions then an honest and open historical determination but with an incorrect conclusion, would be most unlikely to pass the very high burden of proof required to show fraudulent or criminal conduct.
However a word of caution for any PSC contractors involved in an HMRC compliance check or enquiry now or at some point in the future – HMRC may want to look at employment status for earlier years as part of a wider, or full enquiry – take advice and resist it by pointing out this statement!
