Even with the initial leniency, HMRC did warn that businesses performing incorrect IR35 assessments will be liable for the tax - but, the implementation of IR35 was accompanied by widespread concern about the accuracy of results from the HMRC CEST tool. Recent disclosures suggest that this scepticism may be warranted.
IR35 was rolled out for the public sector in 2017 and HMRC revealed that multi-million pound tax liabilities have been levied from three high-profile government organisations: the Department of Work and Pensions (£87.9 million); the Home Office (£29.5 million), and HM Courts and Tribunal Service (£12.5 million).
These liabilities are all due to the organisations getting historical employment status assessments for their off-payroll workers wrong. They relied on HMRC’s CEST tool to do their assessments.
This is a red flag for private sector organisations who haven’t yet got a reliable process in place and depend on the CEST tool for IR35 assessment and compliance checks. HMRC are clearly prioritising and mobilising their enforcement activities around compliance.
Our team of employment tax specialists are leading the way on improving accuracy in IR35 compliance checks by developing our own IR35 status tool: the Employment Status Intelligence Platform (ESIP).
ESIP is more than just an employment status tool. Its ongoing monitoring facility ensures that employers continually maintain correct IR35 compliance checks.
To find out more, read about how ESIP compares to CEST.
We can help you get IR35 assessments right and avoid accruing massive tax liabilities, which could have a material impact on your organisation further down the line.
100 businesses use ESIP, including over 1800 users. The tool has already reliably completed 8000 IR35 employment status assessments. As HMRC's expectations of accuracy in IR35 compliance checks are only going to rise, we're supporting our clients to get their assessments right with user-friendly software.