Chaos Still Reigns following IR35 Reform

It’s now nearly two months since the controversial IR35 changes of 6 April, and while things may have calmed a little since its introduction, the dust still hasn’t settled on what must be one of the most unpopular issues to ever affect UK contractors.  

The biggest cause of concern for contractors is that many are still unsure about how, when and why they could be determined to be inside IR35 by their public sector clients. The source of this uncertainty is the lack of consistency being shown by public service organisations when making their decisions. At the moment, contractors that are largely doing very similar jobs are being given completely different determinations. Given the fact that 85 percent of contractors said they would leave the public sector entirely if they were placed inside the IR35 under the new rules, this inconsistency simply will not do.   

Organisations must take Reasonable care

The Finance Bill stated that organisations must take ‘reasonable care’ when setting a contractor’s IR35 status, but the experience many contractors have had so far couldn’t be further from this. The Bill warns public sector organisations about making general and blanket determinations of a contractor’s status, advising that each assessment should be made independently and fairly. However, it has already been reported that a number of public sector organisations have taken a one-size-fits-all approach to this process.  

There have also been a number of reported cases where contractors have been assessed, only to then be reassessed and given a different outcome. This shows the level of confusion there is about just how the new rules should be applied.

HMRC’s tool is not up to the job

HMRC recently released its Employment Status Service (ESS) Tool, which was built specifically to help public sector organisations determine a contractor’s status, but it currently contains a number of inaccuracies and is not up to the job. With IR35 clearly being such a complex issue, the experts are concerned a one-size-fits-all digital tool will never take into account the intricacies of a contractor’s role.

As the IR35 changes are still very fresh, HMRC has not yet had time to refine the tool. Instead, a number of tweaks and updates are being made on the hoof, which is prompting further concern that any changes that are made will be rushed and unreliable.  

How many Contractors are Being Affected?

HMRC has claimed that around 20,000 contractors will be impacted by the changes. However, given that the NHS alone has a workforce of 1.4 million, HMRC’s estimations do look quite low. Given that just 4 percent of contractors believe their public sector clients are prepared to cope with the reform, there’s certainly plenty of potential for trouble ahead.

As public sector contractors across the UK head into unchartered territory, only time will tell how well-informed and accurate the IR35 determinations will be. For the sake of the public sector, given that 85 percent of contractors have said they will leave the public sector if placed inside IR35, let’s hope the determinations are fair.

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