What is a ‘fair’ IR35 determination?

In 2020, we undertook one of the UK’s largest pieces of research into IR35 and Off-Payroll working. One of our objectives was to understand how important “fair” IR35 determinations are, and what exactly “fair” meant.

Being fair is more important than the outcome

We asked a simple question: what is more important, to have a fair assessment, or to be outside IR35? We wanted to establish if people would be willing to trade off integrity for a better individual outcome. 71% of those asked said that having a fair assessment was more important than being determined to be outside IR35.

It is imperative for end clients to understand this, and something we have witnessed first hand via reviews on offpayroll.org.uk. Consultants and contractors do not take kindly to unfair IR35 assessments and are open and vocal with their grievances. An unfair determination process could potentially undermine their right to run their business.

According to those surveyed, the key hallmarks of a fair IR35 determination process are:

Being individually assessed

An IR35 determination is based on the intersection of a client and a consultant/contractor, and their unique working practices. Two individuals with the same contract may have very different individual working practices, or approaches to running their businesses. Therefore it is important that assessments are done individually to deliver a fair determination.

Experts undertaking assessments

IR35 is a complex domain, and it can be tempting for end clients to ask employees with very little experience to undertake assessments. In many cases, consultants and contractors themselves have been managing their IR35 working practices in a professional and compliant manner for many years. They have built up a great awareness and depth of knowledge of the legislation and will be frustrated to be assessed in such a complex area by someone whose only experience of IR35 is a short online training course.

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Independent third parties taking assessments

Contractors and consultants value the opinion and experience of third parties to make IR35 determinations. It does, however, have to be the right third party: they are deeply cynical about big four consultancy firms undertaking assessments. They feel these firms have a vested interest to make the client inhospitable for independent professionals, allowing the large consultancy firms to tender for the work.

Independent third parties with no vested interest are highly regarded by contractors and consultants. Notable firms mentioned were Kingsbridge, IR35 Shield and QDOS.

HMRC’s tool, CEST, came in last place when contractors and consultants were asked to rank methods for delivering fair IR35 determinations. This tool has been widely discredited for delivering unfair determinations.

A transparent process

A process that is transparent ranked more highly than the appeals process, highlighting the importance of end clients assessing IR35 fairly first time. Contractors and consultants are more likely to accept the outcome of transparent, fair processes, thus reducing the importance of an appeals process.

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