14 February 2022 
Julia Ascott, Employment Taxes Specialist
A certain bus analogy springs to mind this week as HMRC and the NAO both publish papers assessing the effects of the off-payroll working rules.
HMRC's third party commissioned paper entitled Long Term Effects of the Off-Payroll Working Rules Reform for the Public Sector was a looking back exercise, with more statisical analysis of 'how many people said what' rather than documenting lessons learnt. The report suggested there was little change to the public sector workforce structure, nor were there additional administrative burdens as a result of the off-payroll reforms introduced in 2017.
The question of the 'unable to determine' category from CEST was raised but the report seems to suggest that it was not a significant issue; implying that it didn't crop up very often. Respondents had suggested improvements for HMRC, including having a HMRC contact to make the decision when "unable to determine" does come up, a Status Determination Statement template and guidance on how to determine disputes. However, the report was not published with future improvements in mind.
Conversely, the National Audit Office Investigation into the implementation of IR35 tax reforms focuses on the challenges faced by the public sector who were given very little time with the new guidance before the rules came into effect, also noting that the full CEST tool not available until March 2017. Most public sector respondents stated that they thought they would have enough time to prepare but due to the late publication of the guidance and CEST, they didn't get that time which made the rules difficult to comply with.
In terms of CEST itself, public bodies fed back the challenges they faced, with non-relevant examples, subjective questions, technically detailed guidance and inability to provide a result in all cases. There is direct contradiction between the findings of the NAO and HMRC report on administrative time and costs, with all public bodies interviewed by the NAO explaining increased resources and costs, particularly when the public sector were competing with a private sector not following the same rules/restrictions.
The most significant difference between the two reports is the NAO's reflection on the implementation of the rules, challenges faced by the public sector and HMRC, failures of HMRC, the lessons learnt (and in some cases rectified on the 2021 implementation) as well as next steps for HMRC in improving compliance through education and support, including:
If you don't have time (do any of us!) to read the full report, I highly recommend reading the Summary (pages 8-15) or if you have no time - just the Recommendations from pgs 13-15.
