More than 80 percent (81) 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, research has found.
The government is widely expected to introduce further changes to IR35, making private sector businesses and recruitment agencies responsible for setting the IR35 status of the contractors they engage.
The CEST (check employment status for tax) tool has been created to help individuals find out if they themselves, or a worker on a specific engagement, should be classed as employed or self-employed for tax purposes.
CEST is already being used by many end-engagers in the public sector but, HMRC has also stated that it is fit for purpose in the private sector too.
Research, of more than 1,500 independent contractors, from tax consultancy Qdos Contractor, found that contractors do not trust the tool to make accurate IR35 decisions.
81 percent said they 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. The remaining 19 percent said they have no fears over the effectiveness of CEST.
Chief executive of Qdos Contractor, Seb Maley, said: "All the signs point towards the announcement of private sector IR35 reform this year. So the 81 percent of contractors that 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."