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The IR35 reform – How has the contractor landscape been impacted?

Business Impact

Despite the IR35 reform coming into force in April 2021, Qdos found 30% of the businesses impacted are already reviewing their strategy for managing the IR35 reform.

With the complexity and uncertainty of the IR35 changes, most businesses felt ill-equipped to manage a new way of working, with 14% of the businesses wishing they had engaged with IR35 specialists for further clarity on the new expectations.

Over half of the businesses stated they would have started their preparations for managing the IR35 changes sooner to avoid the additional costs from project delays and losing contractors.

 

Has the CEST tool been more of a hindrance than a help?

The HMRC built the Check Employee Status for Tax (CEST) tool to determine if IR35 applies to a contract.

There are concerns on whether the CEST tool is fit for the complexity of IR35. Data released by the HMRC’s IR35 tool showed that CEST had been used over 1 million times to determine the status of a contractor, with nearly 500,000 deemed outside and just over 300,000 deemed inside.

However, this then leaves over 200,000 cases deemed as undetermined – which as Seb Maley, CEO at Qdos, says, “Here we have proof that CEST has left hundreds of thousands of contractors and businesses in limbo, unsure of whether a contract belongs inside or outside IR35.”

Further criticisms of the tool were highlighted during a select hearing where 97% of the contractors working with the BBC were found to have been assessed incorrectly.

Using CEST in combination with further judgement in more complex cases may be preferable to reduce future risks for both businesses and contractors.

 

Further Guidance

Businesses and contractors need to remain educated on the IR35 reform to avoid future risk across the contractor landscape.

Here at Pioneer Search, we have invested heavily in training our staff to become IR35 advisors to their clients and contractors.

We have also engaged with industry experts to develop our IR35 Solution, which will give you all the information you need to make the correct decisions about hiring and working as a contractor.

For more information, get in touch with us today.