Confidence in HMRC’s ability to stick to IR35 assessments has declined among employers, since the introduction of the new rules in April last year.
According to the latest research from IR35 Shield, the online CREST tool, which produces a certificate that states whether the individual is inside or outside IR35, has been criticised as ‘not fit for purpose’.
Dave Chaplin, CEO of IR35 Shield said there is positivity on the horizon: “Despite the IR35 earthquake, we are seeing green shoots of recovery emerging, both for contractors and the firms that hire them. The levels of blanket bans are decreasing and the use of specialised assessment firms is increasing. The number of firms using HMRC’s Check Employment Status for Tax (CEST) tool is also on the decline, as trust in its accuracy is virtually non-existent.”
Nick Adams, VP EMEA at Globalization Partners, added: “Hiring contractors is often a necessary part of expanding into the local market, as they can offer regional-specific guidance for localising your products, services, and marketing. However, since the off-payroll legislation came into effect, it is imperative for businesses to be proactive in reducing the risk of non-compliance, appropriately classifying each worker to determine whether they will be an independent contractor, employee or digital nomad. This relationship dictates everything from a worker’s tax status to their severance conditions in each and every jurisdiction.”
All large and medium-sized businesses are responsible for classifying the employment status of contractors and are required to follow a new set of administrative procedures to ensure compliance.
Adams adds, “The results of this latest IR35 Impact survey underline how complicated it can be – and with over half of those contractors surveyed still waiting to be assessed by their clients, there’s bound to be a significant proportion of these businesses that will fall foul of the IR35 legislation, and potentially lose valuable members of their workforce. One way to work around this situation is to alter the status of a UK contractor to a full-time employee. This can be done by hiring an Employer of Record. This not only protects your business from the impact of the IR35 rule changes, but it ensures you can confidently hire the workforce you need.”