IT contractors behind IR35 calculator to leave HMRC... because of IR35
Sources say department is undergoing a major crackdown
The IT contractors who built the UK tax collectors' IR35 tool to determine whether freelancers are in the scope of the new tax clampdown have themselves been ruled within the scope of IR35.
According to sources, the IT software consultancy responsible for building HMRC's Employment Status Service Tool had a total of 250 contractors within the department.
All of those freelancers are likely to go under the changes, including the team that built the IR35 tool, sources say.
Another contact working within HMRC confirmed a huge crackdown was under way.
"The IR35 changes are having a big impact within the department, it seems contractors are leaving all over the place – although not being informed quickly enough.
"There are a couple of consultancy firms that are clearly 'out' of the IR35 changes being told they're 'in'.
An HMRC spokesman said: "These reforms are about promoting fairness in the tax system and we are clear that everyone should pay their share. HMRC rightly holds everyone who works for it to this standard. Customers who use our online services should not be affected by these reforms."
HMRC said it is applying the off-payroll for public bodies rules on a case-by-case basis for each role, rather than a particular supply contract.
However, other insiders have accused some government departments of applying a blanket approach to the changes.
One contractor, who had previously worked for the Intellectual Property Office, said all its IT freelancers had been deemed within the scope of the legislation. That is despite having initially been found to fall outside by HMRC's self-assessment calculator.
Another contractor, who asked not to be named, said HMRC was unhappy that most freelancers within his department were initially found outside IR35. He claimed: "Departments have been told to arbitrarily rule that far more are inside IR35."
From 6 April it will be the responsibility of the public sector body to assess whether contractors are in compliance with the intermediaries legislation. The Treasury says it hopes to raise £185m for the year 2017/18. ®