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Companies risk rising number of tax lawsuits from contractors
by Susie Hughes at 10:57 07/08/18 (News on IR35)
Companies engaging contractors risk lengthy court battles and potentially six figure settlements should they fail to comply with recent public sector IR35 reform and widely expected private sector changes, according to tax consultancy, Qdos Contractor.
Following a controversial move in 2017 to hand public sector companies the responsibility for setting IR35 status of the contractors they engage, the Government could extend similar changes to the private sector as early as April 2019.

Since public sector reform, many engagers - most notably the NHS - have been reported as making blanket IR35 decisions, leaving thousands of contractors deemed to be working inside IR35 without a fair assessment of their working arrangement.

Contractors working inside IR35 are taxed as employees but receive no employment rights.

Inaccurate IR35 decisions and contractors’ lack of faith in HMRC has led them to take the issue to a small claims court - a trend which Qdos predicts could rise.

Seb Maley, Qdos Contractor CEO said: “We have it on good authority that in the public sector, contractors are taking clients and agencies to court in order to claim back the costs of wrongly working inside IR35.
"With private sector changes looking increasingly likely, there’s no reason why workers subject to incorrect decisions wouldn’t be prepared to do the same thing. Given the sheer size of the private sector, this could be a disaster.

“To avoid the costs and heavy burden of lawsuits, and to protect companies from any resulting settlements, all companies engaging contractors must prioritise accuracy when it comes to IR35 determinations. Blanket, role-based and risk-averse status decisions simply won’t do.

“That contractors would rather take the matter to court is a damning indictment of the lack of faith these workers have in HMRC to investigate the case impartially. Certainly, it’s time the Government took steps to rebuild its fractured relationship with freelancers and contractors.”

Qdos Contractor research into UK 800+ contractors has previously highlighted:

  • 46 per cent plan to challenge blanket IR35 determinations
  • 95 per cent think HMRC’s handling of IR35 is aggressive
  • 30 per cent have felt bullied into entering a particular working arrangement
  • 69 per cent believe IR35 has the potential to impact mental health
  • 89 per cent of contractors want employment rights when working inside IR35

For more information about all aspects of IR35, including the controversial IR35 reforms see Shout99's News on IR35 section.

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Susie Hughes © Shout99 2018

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