In our roundup of the latest employment law news, including news of further problems involving HMRC's IR35 tool:-
Department for Work and Pensions Found Liable For IR35 Mistakes
The Department for Work and Pensions (DWP) has had to pay out £87.9 million in tax arrears, and interest on those arrears, on account of failures in its IR35 procedures in terms of identifying the correct employment status of its contractors between 2017-20. The errors came to light after being revealed in the DWP's annual accounts for 2020/21
The irony is that the DWP failed to properly identify the contractors correct employment status, despite having used HMRC's online Check Employment Status Tool (CEST) to conduct the employment status assessments.
IR35 has applied to the public sector, including Government departments, since the 6th April 2017. Its introduction has had a devastating impact, leading to amongst other things, a mass exodus of IT contractors from the public sector.
IR35 was extended to medium and large sized businesses (i.e. those with 50 or more employees) in the private sector, with effect from the 6th April 2021, in a move that has been described as potentially “catastrophic for the economy“. Indeed, the Deputy Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), Andy Chamberlain, stated: “This is an astonishingly myopic move. The UK’s greatest competitive advantage is its flexible labour market. This proposal will dramatically restrict that flexibility and starve UK businesses of the freelance talent they need to get work done."
CEST has been widely lambasted as defective, with 42% of assessments found to be inaccurate. Indeed, ContractorCalculator, published a report which stated that CEST was “not fit for purpose” and “hopelessly unreliable and biased.” Co-author of the report, Philip Manley, a former HMRC inspector, stated: “Unless HMRC can disprove the substantial evidence demonstrating CEST’s shortcomings, then it’s clear that CEST is not fit for purpose.” And now, after the latest debacle involving DWP, one has to ask the question that given that one of the Government's very own departments cannot correctly identify the employment status of its own contractors using CEST, how does it expect anybody else to do so?
Responding to the news involving DWP, Qdos CEO Seb Maley stated: "£87.9million is an enormous tax liability and just goes to show the cost of non-compliance. Given HMRC’s very own IR35 tool - CEST - was used to assess the IR35 status of contractors, here we have proof that using it can easily lead to mistakes and staggering financial consequences."
Supreme Court Rules That Burden Of Proof Remains On Claimant's In Discrimination Cases
In the case of Royal Mail Group Ltd v Efobi [2021] UKSC 33, it was argued that the burden of proof had been changed by the Equality Act (EA) 2010 in discrimination cases. Prior to the EA 2010, under the Race Relations Act 1976 and other equivalent anti-discrimination legislation, a 2 stage test existed under which the complainant had first to prove facts that in the absence of evidence to the contrary, a Court could conclude that the complainant had been discriminated against. Should the complainant be able to provide proof, then the burden of proof switched to the employer to provide sufficient evidence to show that the protected characteristic played no role in their conduct.
In the Efobi case, it was argued that as the wording for the first stage of the 2 stage test had changed as a result of the enactment of the EA 2010, from “where the complainant proves facts” to “if there are facts”, and that the burden of proof upon the complainant in the first stage to prove facts had changed as a result. However, the Supreme Court has ruled that the burden of proof had not changed.
In its Judgment, the Supreme Court held that: "The final version [of the Explanatory Notes] published with the [EA 2010 confirms] as follows:.....in any claim where a person alleges discrimination, harassment or victimisation under the Act, the burden of proving his or her case starts with the claimant."
