Forty-eight per cent of contractors believe that IR35 status should be determined by independent contract assessments, according to a recent survey of 1,000 limited company freelancers carried out by independent contractor services firm Qdos Contractor.
IR35 status has historically been self-assessed by contract workers, but concerns over widespread non-compliance with the regulations within Government led to the creation of the Off-Payroll rules, which shift the responsibility of IR35 assessment from freelancers to their end-clients.
Off-Payroll was rolled out to the public sector in 2017 and will be extended to the private sector in April 2020. Many experts including professional bodies are critical of the Off-Payroll rules, with the complexity and risk inherent in making “outside IR35” assessments likely to lead clients to make “blanket” inside IR35 assessments (where all contractors are categorised as employed) or to default to an inside IR35 position in borderline cases.
An ability for clients to outsource their IR35 assessment obligations under Off-Payroll to third parties such as legal firms would potentially reduce compliance costs to clients and allay concerns that clients – who have never had to make the complicated assessments before – could make erroneous decisions. However, under the current proposals, this would not be an option.
A Government consultation on Off-Payroll launched earlier in the year suggested including a requirement for the client’s decision and reasons behind it being shared along the supply chain (i.e. with the recruitment agency), however only a quarter of those contractors surveyed believe that this would ensure the accuracy of IR35 assessments.
22% of contractors believe that holding clients responsible for bad decisions will be most important in ensuring accuracy. The recent consultation suggested a client-led dispute process, but this was strongly opposed in consultation responses from the ACCA, FCSA and IPSE. The ICEAW believed that agencies should also be allowed to appeal status decisions: “There needs to be a statutory and independent appeals process to allow the worker and agencies to dispute the employment status determination provided by the end client”. KPMG believed that inaccuracies in HMRC’s CEST tool will led to increased status disputes.
The consultation has now closed and the Government is processing responses from stakeholders, with a view to publishing draft legislation this summer. Many consultation responses suggested delaying the proposals for another year, until April 2021.
The full results of the Qdos survey were as follows:
- 48% of the contractors surveyed see independent contractor assessments as the key to setting IR35 status accurately
- 24% believe that sharing the reasons behind a decision along the supply chain will ensure accuracy
- 22% think that holding engagers responsible for inaccurate decisions is most important. Currently, end-clients will become liable when ‘reasonable care’ has not been taken in setting IR35 status
- 6% see ‘other’ methods as the critical factor, centring on the need for the parties to be better educated on IR35
4th July 2019.