In IR35

A new study has found that an overwhelming majority of independent professionals currently contracting in the public sector do not believe that either public sector bodies (PSBs) or recruitment agencies have the knowledge to make accurate IR35 decisions without their input.

The survey was conducted by contractor tax advisory consultancy Qdos Contractor. Participating respondents’ reactions indicate that contractors feel ignored or deceived by IR35 tax determinations that they profoundly disagree with. This raises concerns that dissatisfied contractors will leave the public sector in droves.

Rebooted IR35 reforms, which came into effect in April, transferred responsibility for determining each individual contracting professional’s tax status away from the freelancer (where it had traditionally resided) and onto PSB end clients or recruitment agencies. Whichever of these two entities that pays the personal service company contractor directly now assumes responsibility for determining his or her tax status.

Many end engagers have turned to HMRC’s own online Employment Status Service (ESS) to determine employment status. However, concerns about the ESS tool’s reliability have multiplied in light of research from ContractorCalculator, which showed that it delivered erroneous decisions in a high proportion of sample cases that had actually already been properly determined in the courts.

The tool also requires zero input from contractors, despite the fact that these workers are closest to the fine detail of their daily working practices and the specific wording of their contracts.

The Qdos Contractor poll found that only 12 per cent of contracting professionals are confident that PSBs and recruiters are capable of making accurate IR35 determinations without their input. That leaves an overwhelming 88 per cent who believe that it is not possible to make accurate determinations without their assistance.

Qdos Contractor CEO Seb Maley said that the current arrangement has left the vast majority of contractors feeling helpless.

He drew attention to the fact that largely inexperienced PSB end clients and agencies are now expected to make potentially career-defining IR35 decisions without consulting the most vital component: the contractor.

Arguing that this seriously compromises the prospect of making accurate employment status determinations, Mr Maley added: “Given that such vast numbers of contractors are willing to exit the public sector if they are placed inside IR35, mistakes will be costly. Prior to reform, 85 per cent of contractors revealed they would stop working on public sector contracts should they be placed inside IR35.

“Put simply, the prospect of a public sector contractor exodus is still very real. Public sector bodies nor the public sector itself can afford to make mistakes.”

He urged PSBs and agencies to take heed of the contracting professionals whom they engage and start making IR35 determinations collaboratively, using their vital input.

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