HMRC denies outside-IR35 hiring ban as accounts reveal agency’s reliance on umbrella workers

HM Earnings & Customs (HMRC) has denied that it has issued a partial employing ban on confined company contractors, after its most recent set of accounts disclosed a comparatively large amount of umbrella staff carrying out challenge work for the government tax assortment company.

HMRC’s accounts, which address the twelve months to 31 March 2021, disclosed that it engaged 403 short term staff, of whom 15 ended up identified to be operating inside of IR35, all through the reporting period.  

The remaining 388 folks the company made use of all through that time had their engagements categorised as being “out of scope” of the IR35 principles, which – as per HMRC’s reporting principles – usually means they ended up both operating exterior IR35 or engaged by means of umbrella providers.

In a follow-up statement to Computer system Weekly, HMRC confirmed that the extensive majority of the folks categorised as being out of scope of the off-payroll principles ended up employed by means of umbrella providers all through this period, when pretty couple ended up identified to be operating exterior IR35.

The company declined to present Computer system Weekly with a specific breakdown of how a lot of of its contractors are operating both exterior IR35 or by way of umbrellas.

“Given the low amount of off-payroll staff who ended up deemed as being exterior of the scope of the IR35 principles, there would be a hazard that disclosure of the facts could guide to the identification of an person,” mentioned HMRC in a penned reaction to Computer system Weekly.

Having said that, Computer system Weekly understands – by way of resources near to HMRC – that much less than five of the folks whose engagements fell out of scope of the IR35 principles ended up operating on an exterior foundation.

The comparatively low amount of staff engaged by HMRC on equally an inside of- and exterior-IR35 foundation, as opposed to how a lot of umbrella company workforce it uses, has prompted contracting marketplace resources to question whether the company has a partial employing ban in place.

The roll-out of the IR35 tax-avoidance reforms, in the public sector in 2017 and in the non-public sector all through 2021, has resulted in some organisations imposing employing polices that prioritise the employing of contractors that are employed by means of umbrella providers.

This is mainly because providers that engage umbrella company contractors are absolved from having to establish how those people folks must be taxed, mainly because they are – strictly speaking – workforce of the umbrella company by way of which they present their solutions.

This excuses the stop-shopper, which in this circumstance would be HMRC, from needing to establish how these contractors must be taxed, which also relieves them of a sizeable administrative burden.

“The fact that there is a tiny, solitary-digit amount of contractors seemingly hired by HMRC on an exterior-IR35 foundation suggests they have all but implemented a blanket ban,” mentioned a resource inside the contracting marketplace, who spoke to Computer system Weekly on problem of anonymity.

When Computer system Weekly place this assert to HMRC, a spokesperson denied that it has employing insurance policies in place that unfairly favour confined company or own provider company contractors inside the section or its technologies arm, Earnings and Customs Electronic Technologies Providers (RCDTS).

“There is no ban on participating off-payroll staff making use of a own provider company in HMRC or RCDTS,” mentioned HMRC in a statement.

The amount of short term staff engaged by HMRC general all through the 2020-2021 money calendar year is vastly bigger than the earlier calendar year, when its accounts claimed that 55 short term staff ended up engaged by the company all through the twelve months to 31 March 2020.

To this stage, HMRC’s accounts affirm that the quantity used by the company on consultants and short term staff rose from £1.1m to £8.6m involving the 2019/2020 and 2020/2021 money years.

“This must not be viewed as a trend, but is in gentle of the stop of the UK’s changeover period with the EU, Covid-19 and the key Technologies Supply programme agenda we are currently enterprise,” mentioned HMRC.

Dave Chaplin, CEO of contracting authority ContractorCalculator, mentioned that Brexit, the pandemic and HMRC’s electronic transformation workloads would give rise to loads of “classic challenge work” that would be usually carried out by exterior-IR35 contractors.

“Classic exterior-IR35 work is the place contractors supply solutions on a particular challenge, and is output-based mostly,” he informed Computer system Weekly. “Yet they have a tiny amount of contractors hired on an exterior-IR35 foundation, based mostly on their accounts. That does not make feeling.

“HMRC rhetoric about off-payroll has usually been that about 1-3rd of contractors could be working on an ‘inside-IR35’ foundation. Still, right here we are seeing only a handful of contractors out of hundreds being hired in that way.”