The contractors who helped build the new Employment Status Service (ESS) – HMRC’s  controversial new digital tool – have been placed inside IR35 by the organisation.

According to reports from Contractor UK, 18 limited company IT contractors have already left the HMRC because of fears regarding their own status around IR35.

This has – somewhat ironically – contributed to the delays to the tool’s emergence. This placed it in jeopardy ahead of this week’s shift around IR35 judgment in the public sector, whereby public sector organisations decide whether a contractor is inside or outside of IR35.

The fears of those initial 18 contractors have come to fruition unfortunately, as Revenue & Customs Digital Technology Services, a branch of HMRC, has told remaining contractors working for the organisation they be will be deemed inside IR35.

Around 250 contractors are therefore naturally questioning these decisions, and are likely to be fairly down in the mouth around the ruling. The reports do indicate that ‘reasonable care’ may have been shown due to the lack of a blanket assessment and the fact contractors were emailed on an individual basis, meaning HMRC hasn’t inadvertently and rather hypocritically broken its own rules.

But that does not meant that will be that. Some public sector organisations are already seeing a widespread exodus from contractors due to decisions around their IR35 status.

HMRC could be the next organisation to see this – somewhat falling on its own sword.