Legal challenges to the controversial IR35 public sector reforms seem likely, according to a survey released by Freelancer and Contractor Services Association.

The survey queried intermediaries who support about 33,500 workers in public sector roles about the level of IR35 compliance testing undertaken for their workers. Fifty percent of responses reported that no IR35 status tests had been carried out on workers sourced via agencies, with them all being simply deemed inside (42%) or outside (8%) IR35.

Of the half respondents who did experience a compliance test, 26% suggested that a role-based approach, rather than an individual assessment, had been conducted. The remaining 24% reported that individual assessments had been carried out, but these were seldom exclusively tested via the government’s Check Employment Status for Tax tool.

Commenting on the low instance of reliance upon the CEST tool, Julia Kermode, chief executive of FCSA stated that when HMRC issued its CEST tool just weeks before the change, it was already too late. “Public sector employers had already begun conducting assessments in order to hire new workers and to re-assess existing contracts months before the IR35 reforms came into effect,” Kermode said. “As such, they became reliant on other commercially available assessment tools.”

More than one-third of respondents, 36%, believe that legal challenges will now transpire as a direct consequence of role-based decisions being made and 34% of respondents are expecting challenges to workers’ deemed employment status. The survey suggests such challenges may come from the medical, engineering and IT sectors.

“Given all the issues implementing the changes in the public sector, it would be very damaging to the economy if the government was to rush to extend the IR35 reforms into the private sector,” Kermode said. “The chancellor has already promised that the government ‘will carefully consult, drawing on the experience of the public sector reforms’, and we will be putting pressure on policymakers to ensure that Mr Hammond’s promise is fulfilled.”