Ladies and gentleman, the long-awaited tool is finally here – HM Revenue & Customs introduced the tool on 2 March to better assess the employment status of limited company contractors. Although the ESS was initially meant for the use of end-clients, the first question asks the test-taker to identify as an end-client, agency or worker.
The follow the pre-programmed series of questions that vary as per the user’s responses. However, the tool does stop asking questions when it feels it has acquired enough information from the user to arrive at a conclusion about his or her employment status.
However, the tool may not always make a decision. When that happens, it directs the user to contact HMRC for further help but assuring him or her that the results will not be stored on the taxman’s servers.
The bad news is that if a contractor doesn’t have the right to send a substitute to work despite having control on how the work is done, the IR35 tool will most certainly hold such a contract to fall inside IR35. But if the contractor is unwillingly “unable” to work, then that becomes a case of “genuine substitution” and the tool would suggest an “outside IR35” result.
There will be severe consequences if it can be proved that the contractor, end-client and agency deliberately ignored the IR35 legislation.