The Inland Revenue takes too long to decide on contractors’ IR35 employment status, tax experts have claimed.

IRPC Taxation Services said that the five to 12 months the IR takes to decide whether a contractor is employed or self-employed under IR35 rules causes unnecessary stress.

In extreme cases, the decision can take up to three years, leaving contractors enduring a “protracted period of worry”.

The IR frequently challenges IT and engineering contractors, who often work through their own limited company, to test whether they act for the end client as a genuine contractor or as a “disguised employee”.

If the Revenue finds the individual is a “disguised employee” then the contractor may have to pay substantial amounts in backdated tax and National Insurance payments, as well as interest charges and possible penalties.

IRPC tax consultant Andrew Scrivens said: “Delaying the decision puts the taxpayer through a protracted period of uncertainty and worry.

“It is not entirely the Inland Revenue’s fault – it’s largely a result of the Treasury dumping more and more work on the IR without giving it the qualified manpower to cope.”