Seven out of 10 say HMRC off-payroll guidance is not useful

Despite being criticised back in 2022, the taxman’s IR35 help is still coming up short, with a vast majority saying it fails the usefulness test.

More than seven in ten of the IR35-affected have rated HMRC’s off-payroll working guidance “not useful.”

The embarrassing blow for the taxman was recorded by ABAB which describes itself as a “critical friend” of HMRC.

Essentially, the Administrative Burdens Advisory Board (ABAB) is a mix of tax and small business experts, who tell HMRC when it mucks up with SMEs.

In its newly published 2023-24 ‘Tell ABAB’ report, the board didn’t need to “provide feedback” to HMRC (as its remit permits it to).

‘Not Useful’

Rather, figures from its May-to-April 2024 survey seem to speak for themselves.

Out of the tax advisers and businesses polled that used off-payroll working guidance by HMRC, 71.3% said it was “Not Useful.”

By contrast, just 28.7% rated it “Useful,” when asked about HMRC’s ‘Help to comply with the reformed off-payroll working rules (GfC4).’

‘Interesting’

To a diplomatic Susan Ball, tax partner at RSM, only a small chunk of taxpayers finding official OPW guidance useful is “interesting.”

HMRC issued the guidance “at the end of 2023,” in an attempt to bolster IR35 compliance, observes Ball.

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By then, HMRC should have been on top of its guidance ‘game,’ as its taxpayer resources on IR35 had already been strongly criticised.

‘Too general in scope’

In May 2022, the Public Accounts Committee told HMRC that its OPW guidance was overly “long” and “too general in scope”.

Respected MPs on the PAC formally recommended that due to these “problems” with its OPW guidance, HMRC should improve it.

Interestingly, then, despite being told its guidance was “poor” (p3 of the PAC report), HMRC’s follow-up guidance has now been deemed “not useful” by 71.3% of users.

‘Question marks over HMRC support and guidance’

Qdos, an IR35 advisory, says it saw it all coming.

“I’m not surprised, sadly,” the advisory’s CEO Seb Maley told ITContracting.com.

“Since the introduction of the off-payroll rules, there have been huge question marks over the level and quality of support and guidance offered by HMRC.

“Ultimately, this hasn’t helped organisations meet their IR35 compliance obligations.”

‘Staggering’

Maley’s comments come after HS2 joined the list of public sector bodies to have paid or owe a combined total of more than £263million to HMRC for OPW mistakes.

According to HS2’s annual accounts, following an HMRC compliance review into “historic” IR35 assessments in the 2022/23 tax year, the rail body paid £6.2million in backdated tax.

Maley says the now-paid HMRC bill is “staggering,” but he believes HS2’s IR35 failures also raise questions about the tool which HS2 used — CEST.

‘Do you use CEST?’

In ABAB’s survey and after enquiring if OPW guidance was useful or not, the board asked recipients: “Do you use the HMRC employment status tool CEST?”

Not even one in 10 of the respondents said they did (9.1%), although most of those who did use CEST then said they found it “Helpful.”

Yesterday, Mr Maley hinted that the low adoption of seven-year-old CEST proves that it’s not just him who distrusts its results.

‘HMRC insistence that CEST is fit for purpose’

“HMRC’s insistence that CEST is fit for purpose, and up to the task of accurately determining IR35 status time after time, muddies the waters of the guidance being issued [by HMRC],” he says.

“That said, there has been a change in tack from HMRC in recent months, with the tax office doing more to help businesses compliantly manage the off-payroll rules.

“But it goes without saying — there is a long way to go.”

‘Challenging to summarise IR35 into bite-sized chunks’

Last night, Brookson sounded a tad sympathetic to the taxman, implying part of the ‘long way’ may be down to the rules’ extreme complexity.

“Employment status, particularly in relation to IR35, is a complex area requiring knowledge and experience to properly understand and apply.

“It was always going to be a difficult challenge for HMRC to attempt to ‘summarise’ this into bite-sized chunks.

“So I’m not surprised, 71.3% of ABAB survey respondents said they find OPW guidance ‘not useful,’” Brookson CEO Matt Fryer told ITContracting.com.

He added: “Such an attempt would, I suspect, leave many readers confused. And seeking more tailored advice relevant to their specific set of circumstances.”

‘Substance of the OPW guidance isn’t the problem’

The Low Incomes Tax Reform Group isn’t so sure, preferring that the 71.3% problem is possibly due to format, not framework.

Shown the findings, contained in ABAB’s annual report published September 25th 2024, LITRG said: “The problem isn’t so much the substance of the new guidance, but the format.

“At the moment, GfC4 is a fairly long, complex publication that is split into multiple HTML web pages. But this can make for a terrible user-journey, as it makes it hard to browse or ‘skim-read.’”

‘Bad for accessibility’

Traditionally, HMRC content such as GfC4 would have been published in a single booklet, a handbook, or an online PDF.

“This is bad for accessibility and mobile devices, hence the move to HTML,” LITRG’s technical officer Meredith McCammond told ITContracting.com yesterday.

“But PDF had benefits in relation to searchability for example, and allowing users to view the whole guidance at once, at the same time as being able to easily navigate it.

“HMRC needs to find a replacement format to present guidance that is long and complex, while letting the reader retain a sense of coherence, rather than be split into too many constituent parts. We know HMRC is looking at this, and we will feed this example [GfC4] back to them.”