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 hiring ban on minimal enterprise contractors, just after its most current established of accounts revealed a somewhat significant quantity of umbrella employees carrying out project work for the authorities tax collection company.

HMRC’s accounts, which cover the 12 months to 31 March 2021, revealed that it engaged 403 temporary employees, of whom 15 had been decided to be performing inside of IR35, all through the reporting period.  

The remaining 388 people today the company used all through that time had their engagements categorized as staying “out of scope” of the IR35 principles, which – as for every HMRC’s reporting principles – implies they had been both performing exterior IR35 or engaged through umbrella providers.

In a adhere to-up assertion to Computer system Weekly, HMRC verified that the huge greater part of the people today categorized as staying out of scope of the off-payroll principles had been employed through umbrella providers all through this period, though pretty number of had been decided to be performing exterior IR35.

The company declined to supply Computer system Weekly with a specific breakdown of how many of its contractors are performing both exterior IR35 or via umbrellas.

“Given the reduced quantity of off-payroll employees who had been deemed as staying exterior of the scope of the IR35 principles, there would be a threat that disclosure of the facts could direct to the identification of an personal,” reported HMRC in a composed response to Computer system Weekly.

However, Computer system Weekly understands – via sources near to HMRC – that less than 5 of the people today whose engagements fell out of scope of the IR35 principles had been performing on an exterior basis.

The somewhat reduced quantity of employees engaged by HMRC on both equally an inside of- and exterior-IR35 basis, compared to how many umbrella enterprise workers it works by using, has prompted contracting marketplace sources to query whether the company has a partial hiring ban in spot.

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

This is mainly because providers that have interaction umbrella enterprise contractors are absolved from obtaining to figure out how those people today should be taxed, mainly because they are – strictly talking – workers of the umbrella enterprise via which they supply their services.

This excuses the end-customer, which in this scenario would be HMRC, from needing to figure out how these contractors should be taxed, which also relieves them of a significant administrative load.

“The reality that there is a tiny, single-digit quantity of contractors seemingly hired by HMRC on an exterior-IR35 basis suggests they have all but applied a blanket ban,” reported a supply within the contracting marketplace, who spoke to Computer system Weekly on issue of anonymity.

When Computer system Weekly place this assert to HMRC, a spokesperson denied that it has hiring insurance policies in spot that unfairly favour minimal enterprise or personalized assistance enterprise contractors within the section or its technologies arm, Earnings and Customs Electronic Technological innovation Companies (RCDTS).

“There is no ban on engaging off-payroll employees using a personalized assistance enterprise in HMRC or RCDTS,” reported HMRC in a assertion.

The quantity of temporary employees engaged by HMRC all round all through the 2020-2021 economical 12 months is vastly increased than the former 12 months, when its accounts documented that fifty five temporary personnel had been engaged by the company all through the 12 months to 31 March 2020.

To this stage, HMRC’s accounts verify that the amount of money put in by the company on consultants and temporary employees rose from £1.1m to £8.6m in between the 2019/2020 and 2020/2021 economical years.

“This should not be viewed as a development, but is in mild of the end of the UK’s changeover period with the EU, Covid-19 and the significant Technological innovation Resource programme agenda we are now enterprise,” reported HMRC.

Dave Chaplin, CEO of contracting authority ContractorCalculator, reported that Brexit, the pandemic and HMRC’s digital transformation workloads would give increase to heaps of “classic project work” that would be usually carried out by exterior-IR35 contractors.

“Classic exterior-IR35 work is where by contractors deliver services on a unique project, and is output-dependent,” he informed Computer system Weekly. “Yet they have a tiny quantity of contractors hired on an exterior-IR35 basis, dependent on their accounts. That does not make perception.

“HMRC rhetoric all-around off-payroll has generally been that about a person-third of contractors may well be operating on an ‘inside-IR35’ basis. Still, right here we are seeing only a handful of contractors out of hundreds staying hired in that fashion.”