Employment Status Service Tool causes more IR35 confusion

The government has launched a new online tool to help UK contractors work out whether they fall within the scope of new IR35 rules.

The Employment Status Service Tool was launched last week with the intention of showing contractors whether they will be affected by changes to the rules due to come into force next month.

Changes to IR35 legislation

HMRC is preparing for a crackdown on contractors working with public sector clients. By moving contractors onto the public sector payroll, the taxman hopes to generate some £440 million in extra taxes.

But the online tool has been met with confusion, with many contractors reporting that they are immediately found to be outside the scope of the legislation within just a few questions.

Speaking to The Register, one contractor said: “The few people I’ve spoken to wonder why [the changes] have been hyped so much – all of them are ruled out of IR35 quite quickly. It makes me wonder why HMRC have made such a big thing of this.”

New regime met with concern

Public sector contractors have expressed widespread concern about the changes to IR35, with thousands reportedly downing tools altogether rather than face the new regime. Others have reported that they have significantly increased their rates in order to make up for the new take-home income shortfall.

Trade bodies have also raised concerns with the government, with some suggesting that it could render public sector contracting no longer financially viable.

Meanwhile private taxation professionals have suggested that the Employment Status Service Tool is producing inaccurate results, giving many contractors ‘unknown’ status, and passing others who should in fact fail.

Click to use the Employment Status Service Tool.

Are you concerned about changes to IR35? Let us know in the comments.

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