LONDON: UK’s taxmen HMRC has unveiled its tax calculator for contractors to determine whether they should cough up more cash in its freelancer tax clampdown next month. A public beta of HMRC’s Employment Status Service Tool was released yesterday to determine the IR35 status of public sector contractors. The changes have long been dreaded by contractors, with many in the IT space having already downed tools to live for the private sector. Others have been advised to hike their fees by 20 per cent to offset the expected fall in income.
HMRC has said it hopes to recoup an extra £440m in tax by bringing thousands of contractors onto the public sector payroll. However, IT contractors contacted by The Register who have tested the calculator said the impact of the changes appears to be less damaging than originally anticipated. One source said the calculator put him outside the IR35 legislation within five questions. He said: “The few people I’ve spoken to wonder why this has been hyped so much – all of them are ruled out of IR35 quite quickly. It makes me wonder why HMRC has made such a big thing of this?” Another also determined he was outside the scope of the legislation within a couple of questions. “I tend to come in and do specific projects, and get paid on the basis of the outcomes. So in that respect there aren’t many people like me in the public sector.” But many others have warned the tool does not meet their expectations. Freelancer site Contractor Calculator found said that while the tool uses an analysis engine, it fails to cover key areas of employment case law.
Dave Chaplin, chief exec of the company, said “The tool gives a significant number of contractors an ‘unknown’ status [and]… passes some contractors who should clearly fail.” Seb Maley, chief exec from site Qdos Contractor, said: “From a first examination, this test is largely reliant on substitution. If, as a contractor, you don’t have the right to send a replacement, there is little prospect of the tool deeming you outside IR35, even if you have control over how the work is done.” The Association of Taxation Technicians is also concerned that workers may lose part of their income under imminent changes to IR35 employment status tax rules.
