What's still wrong with the IR35 digital tool

An appendix to a letter sent to MPs by the Association of Recruitment Consultancies provides a helpful overview of the issues still outstanding with the IR35 digital tool, known as the ESS.

  • It uses a checklist approach for assessing employment status and this method has repeatedly been rejected by the law courts
  • There is evidence that the results from the tool conflict with decisions made in past authoritative legal cases
  • It allows for an ‘undecided’ outcome, so leaving hirers and agencies confused with no further assistance to hand, and the contractor in limbo
  • There is evidence that it passes arrangements that on a proper analysis would fail, so actively permitting tax avoidance 
  • Tax status and the tax that follows is decided by a piece of technology that may not be correctly programmed; if a court concludes that an outcome of the tool is incorrect the tool will require reprogramming and all decisions based on the tool beforehand may be unsound
  • There are no checks, balances or safeguards in place in respect of its programming, which could be changed by HMRC without notice and without proper justification
  • There is no provision for appeal of a tool outcome or a decision based on the tool outcome
  • While HMRC current policy is to say that it will stand by the tool so encouraging reliance upon it, it could at any time and without any process amend that policy leaving exposed those who have relied on it.
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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