One of HMRC’s go-to tax barristers, Jolyon Maugham QC has warned a parliamentary committee that in two years’ time it will be investigating blanket IR35 decisions by the BBC, NHS, and other public bodies. Appearing before the Digital, Culture, Media and Sport Select Committee, Mr Maugham declared that public sector bodies are declaring all of their contractors to be inside IR35 in circumstances where the law says otherwise.
In a hearing where he had to clarify to the committee several times that using a personal service company is not illegal, even for a role inside IR35 – as he noted IR35 status only changes the way a contractor must pay themselves – the top tax lawyer also hit out at HMRC’s CEST, the tool designed to help decide status. Mr Maugham described having a single tool for employment status as “impossibly difficult” even within a single industry. Establishing a tool that could give correct answers across construction, banking, healthcare media and all other industries is a task he described as being beyond current technological capabilities.
In the context of the hearing’s focus on the BBC, the tax expert noted that the variety of roles at the broadcaster make it impossible to find a one size fits all approach. On the Corporation’s approach to status post-April 2017 he predicted future controversy. “In two years’ time this committee is going to be looking at a different question,” Mr Maugham predicted, “which is whether the BBC and the NHS were right to force everybody to be taxed as employees, in circumstances where the case law has shown after the fact that very often those people were properly taxed as self-employed.”
Drawing a direct link to the changes the government announced in 2015 and enacted last April, he described the way that the NHS, BBC and other public sector bodies have become overly risk averse on tax status. “They’re saying everybody, in effect, is an employee in circumstances where the law does not support that conclusion,” was the damning verdict of one of the Revenue’s go-to prosecutors. To back up his position Mr Maugham reminded the committee that earlier in the day they had heard from BBC presenters for whom CEST had returned an inconclusive result. These people were forced by the BBC to be taxed as employees, he said, “even in circumstances where that result was just wrong.”
Contractors and the organisations that represent them have been saying that the CEST is not fit for service ever since it was hurried into publication, barely in time for last year’s public sector IR35 changes. It no doubt comes as a vindication to hear a top tax QC agree with them.