Self-employment crisis as ‘huge discrepancy’ between HMRC’s CEST & IR35 jobs noted | Personal Finance | Finance
HMRC first introduced changes to IR35 back in April 2021, after a year of delays due to the pandemic. IR35 is legislation which is designed to identify contractors and businesses which are not currently paying the correct tax due to avoidance measures. As a result of the changes, medium to large businesses have now been required to alter their processes when it comes to tax.
It means these organisations are required to assess the contractors they employ, as well as independently setting their tax status.
The changes, however, were resisted by some who suggested this would create harder work for organisations, who may consequently become reluctant to imply contractors or freelancers.
For IR35, even before changes took place, Britons were advised by the Government to use what is known as the Check Employment Status for Tax (CEST) tool.
CEST enables individuals to find out if they, or a worker on a “specific engagement” should be classed as employed or self-employed for the purposes of tax.
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Matt Fryer, Head of Legal Services at Brookson Legal, commented on the matter.
He said: “There is a huge discrepancy between the CEST usage data and the number of private sector contractor jobs being advertised as outside of IR35.
“As demand for skilled labour begins to outstrip supply, hiring businesses that are unable to guarantee outside IR35 status for these contractors will struggle to recruit the talent they need for economic recovery.
“According to CEST data, 49 to 56 percent of all contractor roles clearly fall outside of IR35, with another 19 to 21 percent in a grey area the tool is unable to determine.”
Data from Jobfeed, however, Mr Fryer added, currently indicates only 26 percent of contractor roles are being advertised as outside IR35.
This was true as of the week commencing June 7, 2021.
It is feared, then, that the CEST tool is not wholly doing the job it is meant to be doing, and many are concerned about potential ramifications.
Mr Fryer went into further depth to provide clarity on the situation.
He added: “This is a worker’s market, with REC reporting on rapid rises in hiring and intent to hire for temporary roles, coupled with a shortage of skilled talent.
“As the economy picks up, businesses that require skilled contractors will need to clearly demonstrate they can provide roles outside of IR35 to beat the competition.”
Mr Fryer concluded, however, by posing why more of these roles are not currently being advertised.
One potential answer to that question, he states, may lie in the idea that many businesses do not have faith in solutions they have put in place for meeting the deadline.
But in this case, Mr Fryer stated, hirers who have planned ahead and in detail, are likely to “reap the rewards” of their efforts.
Express.co.uk has contacted HMRC for comment on the matter.