Stephen Ratcliffe, partner at Baker Mckenzie a multinational law firm told HRreview that 90 per cent of contractors are inside the IR35 rules and will be affected by them in April 2020.
HRreview: Some of the leading financial institutions have taken a blanket approach to the implementation of IR35, what are your views on this approach?
Me Ratcliffe: When you take away the major benefit of Personal Service Company’s (PSC), I can see why you will stop using them. I would say 90 per cent of contractors are inside IR35 rules. However, it will allow businesses to say who is a legitimate contractor and whose not.
HRreview: What are your predictions for IR35?
Mr Ratcliffe: It will close the tax loophole. The Government has made attempts to close done tax avoidance, IR35 will have a greater impact than previously. The contracting sector will see its net income reduced but it will rise again to its original level in a few years.
HRreview: There have been a number of high-profile cases that HMRC has lost trying to prove IR35 compliance, what lessons can we take from these cases?
Mr Ratcliffe: The concept of employment is incredibly complex. In regards to any case you fight, it is going to involve some risks. I can understand the confusion surrounding IR35. No-one can give you a 100 per cent answer if you are in the IR35 rules today. The law is in a state of flux. The idea of what is employment and what is not, changes very quickly.
HRreview: What advice would you give to people using the Check Employment Status for Tax (CEST) tool provided by the HM Revenue & Customs (HMRC), and do you feel it is fit for purpose?
Mr Ratcliffe: Some of the criticism it has received is deserved and some are not. It does give you an answer to a very complex question. I think HMRC is trying their best and I do have sympathy for them but as I said the criticism is valid.