The Association of Recruitment Consultancies (ARC) has responded to findings from Contractor Calculator that HMRC’s online “Employment Status Service” (ESS) tool yields inaccurate results by calling for a thorough investigation into the assessment instrument’s flaws.

Contractor Calculator tested the ESS tool, belatedly released by HMRC only last week, by running the results of 21 IR35 Tribunal cases through it. The ESS results disagreed with the findings in the various Court hearings, all of which arose after nuanced deliberation over the contracting professionals involved and their contracts.

ARC Chair Adrian Marlowe believes that only two explanations are possible: either Contractor Calculator failed to input the information properly, or the tool is indeed as flawed as Contractor Calculator says.

Mr Marlowe noted that these claims arose on top of the ARC’s own warnings of potential unlawfulness in HMRC’s approach to forthcoming IR35 changes. This was the subject of a recent letter to the Revenue by Bindmans, the trade group’s lawyers.

Pointing out that the checklist approach adopted by the ESS has consistently been rejected by Law Courts for its unsuitability in determining employment status, Mr Marlowe added: “Given that the Contractor Calculator allegations raise some very serious questions, I would expect HMRC to double-check that the tool results are in line with the Court findings and then confirm that result. This would provide some kind of assurance. However, is it simply good enough for HMRC to say (as they have stated) that ‘None of these claims is correct. The tool is working correctly and has been extensively tested?’ Does their response merely encourage the belief that HMRC will bear no criticism and is set on its path regardless?”

Mr Marlowe said that HMRC appears oblivious to the fact that criticisms levelled against its approach to IR35 by the ARC, Contractor Calculator and many others are meant to be constructive rather than destructive. The aim is to achieve a fair and accurate solution to the problem that the Revenue is endeavouring to address.

Emphasising that “there was no consultation on whether there should be particular reliance on an online tool in the first place,” he added that evidence now shows that its results seem to fall noticeably short. He added that the ARC believes that the public sector IR35 proposition is “indelibly unsound.”

Contractor Calculator’s evidence means that the ESS tool requires thorough investigation, Mr Marlowe continued.

He concluded by stating that the ARC’s calls for Chapter 10 to be scrapped and a proper review into IR35 to be launched over the coming months are even more justified.

Interested parties may contact the ARC at The trade body will also provide a copy of Bindman’s letter to the Revenue on request.

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