ARC seeks formal review of “unlawful” IR35 tool

Amid growing complaint from a wide range of parties, including public sector hirers, lawyers for The Association of Recruitment Consultancies (ARC) have formally written to HMRC about the proposed IR35 rules expected to apply from 6 April 2017.

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.

“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”, explained 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’.”

ARC has set up a fund* to further this issue and to enable it to address government policy towards the public sector, with the objective of creating a better legislative platform for contract and supply recruitment.

Marlowe continued: “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.”

He 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.”

*Those interested in contributing to the fund should contact ARC on info@arc-org.net. A copy of Bindmans’ letter to HMRC is available on request.