By Lynne Gowers on 13th March 2017

HMRC’s Employment Status Service (ESS) tool launched ahead of changes to IR35

ESS tool

With less than a month before major changes to the way IR35 is applied in the public sector, HMRC’s much-touted digital Employment Status Service tool has gone live. It is intended to assist workers, or anyone taking them on, to assess their employment status for tax.

What’s changing?

From 6th April the responsibility for making the IR35 status decision will transfer from the individual operating the personal limited company (PSC) to the public sector body they are working for.

At the same time, the responsibility for making the necessary deductions will be that of the “fee payer” – the body paying the PSC – be it an Employment Intermediary, Agency or the Public Sector body.

How does the ESS tool work?

According to the guidance notes, anyone using the service must first know the following:

  • The worker’s responsibilities
  • Who decides what work needs doing
  • Who decides when, where and how the work is done
  • How the worker will be paid
  • If the engagement includes any benefits or reimbursement of expenses

Using a series of questions, the ESS tool makes a determination as to whether the worker is employed or self-employed for tax, National Insurance or VAT purposes.                                                         The questions cover familiar IR35 ground, examples include “Can you provide a substitute and if so, have you ever supplied one?” and “How much control do you have over the work you perform?”

Screen shot of HMRC’s ESS tool


The tool produces one of three different outcomes according to the information it is fed:

“The intermediaries legislation applies to this engagement” = Caught by IR35

“The intermediaries legislation does not apply to this engagement” = Not caught by IR35

“Unable to determine the tax status of this engagement” = Can’t give a yes or no answer and directs the user to further HMRC guidance.

3 things to know about the ESS tool

1. It is official rather than mandatory. Public sector bodies won’t have to use it as their means to determine IR35 status. Indeed many public sector bodies are making a blanket decision that all their limited company contractors will be caught by IR35 from 6th April.

2. There’s no guarantee the result is right! In their own words, HMRC states that they will “stand by the result unless a compliance check finds the information provided isn’t accurate.” In effect, HMRC just have to say “you are wrong” and the decision doesn’t count for anything.

3. There is no formal appeal process. If a worker using the tool get a different status outcome from the decision of their public sector body, they have no currently no legal means to challenge it.

The view of ContractorCalculator CEO, Dave Chaplin, is that “the live public version of the tool that HMRC released on 2 March is still failing to cover key areas of employment case law and is simply not fit for purpose”.

We continue to monitor developments with interest. If you are a Boox client working in the public sector and have not already spoken to us about how April’s changes will affect you and your business, get in touch to arrange a 1-to-1 telephone consultation.

For clear, balanced advice and all the latest news on IR35, go to

Lynne Gowers Written by Lynne Gowers

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Although we attempt to ensure that the Information contained in this publication is accurate and up-to-date at the date of publication it may not be comprehensive, we accept no liability for the results of any action taken on the basis of the information they contain and any implied warranties, including but not limited to the implied warranties of satisfactory quality, fitness for a particular purpose, non-infringement and accuracy are excluded to the extent that they may be excluded as a matter of law.

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