IR35: Contractors urged to take new test to avoid uncertainty

Contractors working in the public sector are being urged to take a new test using the Government’s IR35 status tool to guarantee they are being taxed the appropriate amount.

The Association of Independent Professionals and the Self-Employed (IPSE) has called upon all public sector contractors to check their IR35 status in order to put a stop to confusion surrounding recent public sector rule changes.

The new rules, announced in the Spring Budget 2017, mean that the public sector organisations must now determine the IR35 status of each of its contractors, rather than the contractor themselves. If the public sector organisation deems the contractor to be inside IR35 they must apply tax to the individual in the same way as they would a full-time employee.

There have already been reports of public contractors, such as locum doctors, being placed in an incorrect tax bracket.

The new Employment Status Service tool, unveiled by HM Revenue & Customs (HMRC) last month, should provide complete clarity around an individual’s IR35 status. However, the IPSE believes many public sector bodies have taken a blanket approach and are deeming too many contractors to be inside IR35.

Chris Bryce, CEO of IPSE, said: “If public sector organisations were given sufficient time to prepare and followed the guidance laid out by HMRC’s ESS tool, the widespread confusion and uncertainty could, and would, have been eased.

“We urge all contractors in the public sector to complete the test and take the results to their client.

“This is the only way contractors can get fairness and clarity. HMRC has said it will stand by the results of their ESS tool and IPSE intends to hold them to this.”

Date published 18 Apr 2017 | Last updated 18 Apr 2017