The case for a statutory employment test

The high-profile case of Adrian Chiles and his ongoing dispute with HMRC over his IR35 status has reignited the debate surrounding the complexities of employment status and tax obligations. IR35 is often misunderstood. All IR35 does is ensure that an employee cannot put an intermediary (usually a personal service company) between them and their employer to secure a tax advantage.

If a direct engagement would be employment IR35 will apply if a personal intermediary is inserted into the same supply chain. But as it stands the lack of an objective method to determine employment status under IR35 means significant uncertainty for individuals businesses and tax advisers and means that each case must be considered on its own merits. This approach also creates inconsistency leading to a backlog of cases waiting to be heard by the Tax Tribunal.

The current ‘test’ to determine employment status has...