|The Government is widely expected to introduce further changes to IR35 in due course, making private sector businesses and recruitment agencies responsible for setting the IR35 status of the contractors they engage. This would be in line with the 'controversial' system currently in operation in the public sector.
But research shows that if IR35 reform is extended to the private sector, 81 per cent of contractors would be deterred from working through a recruitment agency or for a business if HMRC's CEST Tool was the only method used to set IR35 status.
The CEST tool (Check Employment Status for Tax) is already being used by many end engagers in the public sector following last year's reform. It replaced the ESS (Employment Status Service) which had already been the subject of much criticism and complaint.
HMRC has stated that CEST is fit for purpose in the private sector too.
Research by contractor tax specialists, Qdos Contractor, from more than 1500 independent contractors shows they do not trust the tool to make accurate IR35 decisions:
- 81 per cent would be deterred from working through a recruitment agency or for a client in the private sector if CEST was the only method used in setting status
- 19 per cent have no fears over the effectiveness of CEST.
This echoes contractors' concerns surrounding CEST following its release in April 2017 in the lead up to public sector IR35 reform. Last year, research showed that 85 per cent of independent workers did not think it was effective.
Qdos Contractor CEO, Seb Maley, said: "All the signs point towards the announcement of private sector IR35 reform this year. So that 81 per cent of contractors would rather not work through a recruitment agency or for a client using only CEST poses a real threat to staffing in the sector.
"Question marks still remain over CEST's reliability, and understandably, contractors do not want to be wrongly placed inside IR35 and therefore made to pay similar taxes to an employee, but without any of the benefits.
"IR35 is a particularly complex tax legislation and should private sector changes go-ahead, agencies and clients must reassess the way in which they make IR35 decisions. After all, CEST is not mandatory and independent assessments are perfectly acceptable."
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Susie Hughes © Shout99 2017