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98% of HS2 Contractors Deemed ‘Inside IR35’ FOI Reveals

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Contracting authority ContractorCalculator has learned that 98% of IR35 status assessments carried out by High Speed 2 (HS2) in 2018 deemed the contractor to be caught by the Off-Payroll rules, fuelling suspicions of further non-compliance with the legislation in the public sector.

Responding to a Freedom of Information (FOI) request from ContractorCalculator, HS2 confirmed that 979 of the 1001 assessments conducted in 2018 returned an ‘inside IR35’ verdict, with only 22 contractors deemed outside the scope of the rules.

The figures are strikingly similar to those recently returned to ContractorCalculator by Network Rail, which judged 99% of contractors to be caught by IR35 in 2018. Further information disclosed by Network Rail revealed that it had adopted an unlawful role-based ‘blanket’ approach to status assessments, which will raise questions about HS2’s own practices.

Commenting on the latest revelations, Dave Chaplin, CEO and founder of ContractorCalculator said:

“Just last week, ContractorCalculator broke the news that FOI responses from Network Rail exposed what the public body had referred to as ‘a strawman process of determining status’.

“This process involves assessing the status of generic roles using HMRC’s Check Employment Status for Tax (CEST) tool, before applying that determination to contractors undertaking the job. Despite being non-compliant with the Off-Payroll rules, Network Rail correspondence revealed that this practice was developed in conjunction with, and approved by, HMRC.

“Compliance practices aside, the 98% of contractors considered caught by IR35 in 2018 alone is enough to warrant suspicion. The number is wildly inconsistent with HMRC’s estimation that roughly a third of contractors should find themselves caught by the rules, yet strikingly similar to the rough proportion of ‘inside IR35’ outcomes found by other public bodies using CEST.

“The proportion of contractors deemed within scope of the rules by the BBC, Network Rail and HS2 are 92%, 99% and 98% respectively. These numbers are shocking enough. Yet, despite the overwhelming conflicting evidence, HMRC stands firm in its confidence in CEST’s accuracy.

“Whilst non-compliant application of the Off-Payroll rules has resulted in a sharp rise in the number of public sector contractors taxed as ‘deemed employees’, the unintended consequences of the legislation are already apparent.

“This appalling treatment of the self-employed has backfired for Government. Rates to obtain talent have soared, while the ability to source talent has diminished, causing considerable costs to projects such as HS2.

“The Off-Payroll rules have been an act of self-harm on the public sector, yet Government seems intent on inflicting the same wounds on the private sector.

“Government needs to delay its proposed extension for at least one more year while independent data gathering is conducted and recognise the hard truths about Off-Payroll that HMRC has so far refused to acknowledge.”