This week's opinion: 31 October 2019

The decision by HMRC to use information resulting from the transference of IR35 liabilities to engagers to open a new enquiry into earlier years only ‘if there is reason to suspect fraud or criminal behaviour’ has been welcomed. If HMRC is even half right that ‘only one in ten people who should be paying tax under the current off-payroll working rules are doing so correctly’ the system would be overwhelmed were IR35 investigations to be routinely opened for back years. 

There are historical resonances here. Older readers will recall the ‘Fleet Street casuals case’ (R v CIR (ex parte National Federation of Self-Employed and Small Businesses Ltd [1981] STC 260) in which the Revenue agreed that new enquiries into past failures to declare casual wages would not be pursued if individuals met their obligations in future. The two situations are not the same – the Fleet Street workers were involved in evasion – but the parallels are striking. The judicial review in the Fleet Street case concluded that the Revenue’s policy was within its care and management powers and, in the unlikely event that HMRC’s new policy were to be challenged, I think it would be supported by the courts. But, as we have seen in a number of cases, defining the scope and extent of those powers is not easy.

HMRC’s decision is a pragmatic response to a difficult situation and allows everybody to move on. So I broadly welcome it. But I wonder whether it is right for HMRC to say that for this part of the tax system only it will ignore some information when deciding whether to open an enquiry. Why here and not in any other problematic area? There are difficult issues of public policy here that are worthy of a wider debate.