The Association of Recruitment Consultancies (ARC) reports that its lawyers have formally written to HMRC about the proposed IR35 rules expected to apply from 6 April 2017.

“Use of an online tool has always been claimed by HMRC as fundamental to the success of its new policy to require public sector hirers and agencies to assess IR35 and, where it applies, pay taxes on a PAYE basis”, explains Adrian Marlowe, chairman of ARC. “However as our public law specialist lawyers, Bindmans, have now said in their carefully argued letter, “reforms (to IR35), whilst the online tool remains flawed …. in the ways set out…, would either be unlawful or lead to unlawfulness.

Against the background of continuing complaint from a wide range of interested parties, including public sector hirers, and a failure by HMRC to address some fundamental legal issues, ARC has called on the government to undertake not to implement the draft legislation until a proper and meaningful review has taken place to address concerns about the legality of the reforms.

Marlowe continues “The process of consultation in respect of the use of an online tool has been deeply worrying. From the outset we have expressed concerns, as have many others, as to how the tool could work legally in practice given that HMRC says that it will stand by the result. The tool was always likely to be set up on a check list basis, a methodology repeatedly ruled by the courts as the wrong approach. With few checks and balances in place over the programming of the tool, amongst other things, there is a real risk of unfair prejudice.”

“Also it has not helped that progress of the government programme has been on a drip by drip basis over a long period. Even today, less than one week before the budget, HMRC has said that it is still evolving the tool and may change the draft legislation. So with no clear and final position in sight, the government appears determined to make hirers and agencies liable and use the tool regardless of the concerns.”

Marlowe concluded, “The fact that there should be IR35 reform is in no doubt, but the method used should not bring about the unlawfulness and problems that seem very apparent, as advised by our lawyers Bindmans.”

ARC has set up a fighting fund to further this issue and to enable it to address government policy towards our sector – the objective being to create a better legislative platform for contract and supply recruitment. All contributors are welcome as ARC seeks to establish a united front and a coordinated approach in line with its primary policy objectives.

Interested parties should contact ARC on . A  copy of Bindmans’ letter to HMRC is available on request.