We ask Dave “Mr. IR35” Chaplin’s take on the latest Parliamentary news on IR35 and how it is impacting businesses, freelancers and our “free” press
OPINION/Q&A
IR35 has arguably taken its toll on UK Plc, small companies and freelancers. But perhaps the biggest and yet under-reported downfall this tax legislation has had is its squeeze on independent journalism and in particular the BBC’s ability to hire freelancers who work through their own company. Between 2017 and 2018 the BBC engaged 60,000 freelancers across its programmes on and off air. Today, post-IR35 many of the BBC’s freelancers are having to work as a “PAYE freelancer” which is pretty much a temp worker with a fixed contract for a set period.
The freedom element fades. They are unlikely to take on more work with other news outlets during this fixed contract. For many, this not only stifles their career but earning power. Without freelancers and their independent views and voices, the foundation of any democracy also comes into question.
Some may find that statement a bit dramatic, but with mass layoffs in the media sector across the globe due to a lack of budgets, there isn’t enough staff to cover the news. When people are stretched they become stressed and leave. Freelancers are the solution.
Do we want our news spoon-fed to us by AI bots and political agendas rather than independent journalists? Especially now with multiple wars and conflicts threatening world peace? Do we want to be scrambling to find the real news when it really matters? And how do IR35 and HMRC policies come into all of this? Read on to find out.
Part I
BBC and its struggle since IR35
Last week Tim Davie, Director General at the BBC and member of his team faced questions about IR35 by the Public Accounts Committee. Following the recent Kaye Adams/Atholl House IR35 case, it was inevitable that IR35 was raised and questions were posed to the BBC team during the session. But just a week after, it was HMRC officials who were in the hot seat.
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Dave Chaplin, CEO of IR35 compliance firm IR35 Shield and an advocate for self-employed workers, tuned into the debate. “We learned during the IR35 discussion between the BBC executives and the Public Accounts Committee that there are still 100 IR35 cases outstanding and unresolved which begs the question – why has it taken so long and why has HMRC been dragging its feet over the last seven years since the new rules came into effect? Ordinary taxpayers who are freelancers at the BBC have been subjected to worry and are still living and working under a cloud of uncertainty which must be extremely stressful.”
No matter which way you look at it, IR35 is fast-tracking the death of freelance journalism, which by association, is the demise of independent news and keeping government and its departments held to account.
I have every sympathy for the BBC and other broadcasters who rely on the expertise of freelancers to support their organisations. IR35 is simply not working and is impeding UK plc and the UK economy. Moreover, HMRC is hounding genuine freelancers such as Kaye Adams who was pursued for ten years by HMRC over an IR35 dispute which was eventually resolved in her favour.
Dave Chaplin, IR35 Shield and advocate for self-employed workers
“HMRC is playing judge, jury and executioner, able to arbitrarily decide if someone falls under IR35 based on vague criteria like ‘mutuality of obligation’ and ‘right of substitution’ and it is oftentimes wrong in its assessment.
We urgently need accountability, transparency, and fairness when it comes to tax and the self-employed. If they are to win the next general election, the Conservatives need to right the ship and treat the self-employed like the backbone of the economy they are – not enemies of the state.
Dave Chaplin
Q&A: IR35 and its impact on independent news
Observing firsthand the struggles of freelancers navigating IR35 through numerous committee meetings and court cases, IR35 expert Chaplin analyses the regulation’s impact on independent journalism.
FI: If we see a cull of independent/freelance journalists due to IR35 on top of mass layoffs in media and news outlets what could that mean for the calibre of news we depend on every day?
DC: I’m aware of some highly skilled self-employed veteran journalists who are thinking of hanging up their hats because they are being misclassified. If the quality of investigative journalism degrades, it negatively affects the ability of the media to hold government to account – which is the bedrock of a democracy.
FI: If you had your way what would be the ultimate solution to IR35?
Bin IR35. Increase the minimum wage for low-paid workers on zero hours. The rest takes care of itself. The self-employed get paid more per day because they are an on-demand resource, which means overall they pay more tax. But, we need to look after the lower paid and guard against false self-employment.
There are 4.5 million self-employed but the government seems hard-pressed to punish those who are solo self-employed. Is that why they feel no need to change IR35?
The incumbent Party is a sunken ship, and the Labour Party already has the next General Election in the bag – so, neither Party needs to promise the self-employed anything to get their votes. The self-employed are politically homeless.
Part II
HMRC under scrutiny by MPs over IR35 and the media sector
A week after the BBC team was questioned, a Public Accounts Committee (PAC) of a cross-party group of MPs expressed serious concerns that HMRC’s tough approach to IR35 is deterring legitimate economic activity and unnecessarily deterring companies from using contractors.
Chaplin, who provided evidence to the hearing, relayed that the Committee has recommended that HMRC provide the Committee with the number of active litigation cases for IR35 and the amount of tax at risk and assess the impact of HMRC’s approach to administering IR35 reforms on the use of contractors in different sectors.
Following the hearing. Chaplin had this to say:
“The Public Accounts Committee’s scrutiny over the implementation of the IR35 Reforms correctly identified that the new rules are deterring legitimate economic activity, which aligns with what we are seeing on the front line, particularly in the media sector. We are seeing broadcasters seeking to misclassify people as ‘deemed employees’ based on risk, rather than the law because the broadcaster fears HMRC will tell them they’ve got it wrong and issue them with a tax bill.
“The underlying problem is that HMRC is following its own guidelines, which are misaligned with the law, having not been updated for years. HMRC were told by the Court of Appeal on 22 April 2022 that they had wrongly misinterpreted areas of status case law, and that the approach they took was ‘myopic’. Despite this, HMRC has not updated its guidelines, and case inspectors are still applying the law incorrectly.”
IR35 guidelines need updating
Chaplin says despite freelancer wins in court, HMRC has yet to update its guidelines. He said that in every IR35 hearing since the Atholl House ruling at the Court of Appeal on 22 April 2022, HMRC’s own counsel and taxpayers have “relied on the binding law from the Court of Appeal, but clarity from that case has not yet made it into HMRC’s guidelines.
If the police behaved that way, the Crown Prosecution Service (CPS) would throw the cases out. Regrettably, we do not have independent oversight of HMRC, which is why so many taxpayers are being wrongly accused of being in scope of the IR35 rules. Parliament needs to intervene.
Dave Chaplin, CEO, IR35 Shield
“We currently have a ‘bad policing’ problem with IR35, where the IR35 tax police are writing their own rule book, and not following the law, leaving taxpayers with the only option of appealing to an expensive and costly tax tribunal, which many cannot afford. IR35 tax cases are notoriously complex, demonstrated by the fact that in the last 24 IR35 tax tribunal hearings, HMRC has fielded barristers in all cases, except two – a fact that contradicts Mr Harra’s claim in Oral Evidence to the PAC that in most hearings HMRC do not use legal Counsel.
For now, HMRC is acting as judge, jury, and executioner, using rules misaligned to the law. If the police behaved that way, the Crown Prosecution Service (CPS) would throw the cases out. Regrettably, we do not have independent oversight of HMRC, which is why so many taxpayers are being wrongly accused of being in scope of the IR35 rules. Parliament needs to intervene.
Dave Chaplin
“Mr Harra also claimed that HMRC has won 70% of cases, which is untrue – of the last 22 hearings since 2017, the scores are pretty much even,” says Chaplin.
While Harra attempted to dismiss the Public Accounts Committee’s significant concerns regarding IR35, the Committee Ministers were reportedly unconvinced by his defensive arguments. This situation necessitates action from HMRC, as the current approach appears to be in violation of the legally binding HMRC Charter, which guarantees fair treatment for taxpayers.
“For now, HMRC is acting as judge, jury, and executioner, using rules misaligned to the law,” says Chaplin. “If the police behaved that way, the Crown Prosecution Service (CPS) would throw the cases out. Regrettably, we do not have independent oversight of HMRC, which is why so many taxpayers are being wrongly accused of being in scope of the IR35 rules. Parliament needs to intervene.”
