With changes to the off-payroll working rules imminent, 69% of a staggering 12,000 contractors have said they do not believe the way their client has assessed IR35 status is fair, with 58% of the opinion that IR35 decisions are not being made with ‘reasonable care’ despite this being a legal requirement.
In what claims to be the largest survey of its kind, the information gathered by resource site, Contractor Calculator, shows contractors do not think their medium and large private sector clients – that will be tasked with administering the IR35 rules from 6th April – will be ready for the changes or will adhere to the rules.
The Government has said it intends to introduce IR35 reform to prevent non-compliance, but according to contractors, the incoming reform is actually contributing to the rules being broken. In addition to concerns held by most contractors that ‘reasonable care’ has not been taken by their clients, only 38% have so far been provided with a ‘Status Determination Statement’ (SDS), with the majority (62%) yet to be told why they have received a particular IR35 decision. This is despite both being a legal requirement under the incoming legislation.
Also worth bearing in mind is that 53% of contractors have been assessed by HMRC’s controversial IR35 tool, CEST – which has led to only 27% receiving an ‘outside IR35’ decision. Meanwhile, just 1% of contractors have successfully overturned their client’s original IR35 determination, which casts further doubt over the fairness of the tax office’s ‘Client-led disagreement process.’
The Treasury’s Jesse Norman recently insisted that blanket IR35 decisions are not being made by medium and large private sector firms. And while this research doesn’t expose non-compliant blanket decisions, it does suggest that a large number of companies intend to stop engaging contractors altogether to sidestep reform. This has become a trend in the financial services sector, with a number of banks banning contractors due to IR35 changes.
For example, 30% of businesses have offered contractors the option to work via an umbrella, where the IR35 legislation does not apply. 14% of contractors have been offered permanent or fixed-term employment contracts, 13% agency PAYE positions while, even at this late stage, more than a third (35%) are yet to be offered an alternative to contracting by their clients.
Contractors also made their feelings known about CEST, with only 9% stating they would accept a decision made by the tool. Additionally, 70% of independent workers do not believe CEST reflects the law, with the fact that it ignores Mutuality of Obligation (MoO) no doubt contributing towards this view.
Contractors fear they will be unfairly placed inside the IR35 legislation by risk-averse clients, which has poured more fuel on the ‘employment rights for employment taxes’ fire. Given that contractors who work inside IR35 are considered ‘employed for tax purposes’, 92% of contractors have said they want sick pay at least. 75% have called for maternity or paternity pay, 82% want legal protection for disciplinary or grievance issues, while 81% would like access to income support.
More than half of independent workers (58%) have also outlined plans to lodge an appeal at an Employment Tribunal to secure employment rights from their client if they are placed inside the legislation.
With less than one month to go until changes to the off-payroll working rules are enforced, Contractor Calculator has said this survey indicates that “rife non-compliance” is “killing” the flexible workforce. The site says this is reflected in the 23% of contractors who do not intend to stay with their current client after 6th April, the 13% of independent workers who are likely to leave the UK and the 23% who have said they plan to stop contracting due to IR35 reform.