Next week IR35 reforms come into force in the public sector, however 50% of contractors are failing on IR35 and facing status issues, according to findings from ContractorCalculator.

The findings came from more than 5,000 free IR35 reviews carried out by ContractorCalculator’s employment status tool IR35testing.co.uk.  Thousands of public sector contractors are being affected by the reforms and IR35Testing.co.uk has seen a range of contractors across all sectors taking its test from nurses to IT contractors.

Analysis from ContractorCalculator shows that, of the 50% who are failing, 58% are not allowed to substitute so are therefore providing a personal service, making it much harder to stay outside IR35. Furthermore, 20% of the fails are told how to do their work.  Without autonomy on how to complete work it is near on impossible to be considered outside IR35. Moreover, 39% are not working on projects while 38% are required to work minimum hours and 29% say they could be asked to work on an alternative project. ContractorCalculator states that such factors indicate a very strong ‘mutuality of obligation’ between the client and the contractor, an issue that crops up in many IR35 cases in court.

“The level of workers we are seeing being caught by IR35 over the last two months is not surprising, particularly when we look at the types of workers using our IR35 review tool – many of them are working in the public sector as nurses and social workers,” Dave Chaplin, CEO and founder of ContractorCalculator, said. “Close to 100 nurses who have taken our test have been found to be within IR35.”

“HMRC has attempted to achieve the impossible in a matter of months and its Employment Status Tool is unreliable. I would urge agencies and hirers to consider using other means to assess IR35 status, otherwise they could find themselves with a considerable tax risk sitting on their balance sheets,” Chaplin said. “The new reforms are already driving contractors out of the public sector into private sector firms who now have a significant commercial advantage to attract the best talent. The public sector is going to lose out all round.”