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Public Sector IR35 Rules: Am I liable?

Q. I’m hoping you can help. As you will be well aware new off-payroll rules will come into effect in April for contractors operating within the public sector. I am a contractor operating my own Limited company engaged through an employment agency. I send a timesheet to the end client who in turn sends it to the agency who then pay me. My contact is with the agency and they in turn I imagine have a contract with the public sector body.

As I understand it from your article ‘Off Payroll Rules Have Landed‘ even though I do not have a direct contract with a public sector body I am still liable to the new IR35 rules given that the employment agency has a contract with them. I will also, I’d imagine, be caught by the rules governing supervision, direction and control despite an independent 3rd party review of my contract.

My question is what in your opinion would be the interpretation of the new rules for a contractor seconded into a public sector role by private company.

For example a private sector consultancy engages the services of a limited company contractor and a contract is drawn up between them to fulfil a distinct project. That private sector company then places the contractor in to offices of the public sector body to complete the project again being subject to supervision, direction and control. Do the new rules apply?

A. You are correct in stating that the rules will apply regardless of whether the contract is direct or through an agency. It means the agency would become your ‘employer’ for tax purposes if you were inside IR35 from April 2017.

It is also worth pointing out that the determining factors around IR35 will not change. Control – whilst very important – is only part of the picture when assessing your status and other issues such as personal service and mutuality of obligation still need to be taken into account.

Your point on working through a consultancy model is very much dependent on how the project is defined and delivered. If a consultancy is delivering a specific project and using resources of it’s choosing to complete the work, the likelihood is that they would be defined as the ‘end client’ of their workers – therefore meaning the engagement would not be considered as within the public sector. If they were essentially supplying staff to fill roles at the public sector client, however, this would fall under the scope of the new rules.

By Contractor Doctor

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26 thoughts on “Public Sector IR35 Rules: Am I liable?”

  1. Ying Tong

    There is at least one contract available at a city council in Yorkshire this morning. I know this because I declined an interview for it after learning that the client is a public authority.

  2. mark williams
  3. Hajo

    When an agent emails you a public sector job, tell them that you can’t consider it because of the IR35 risk. Spread the message.

  4. Mr PSC Contractor

    I have recently been offered 2 contracts in Public sector land. I have ask both agencies if they are deeming the contracts in or out of IR35 post April. (Its up to the agency to decide correct? )

    One said, I don’t know, the other said how do you work (I’m a 3rd line tech – clients bring me in to be the SME on a technology, so not much direction and control going on) and the agent said fine – you’re outside.

    both answers failed to fill me with confidence and in both cases I said the rate was too low if I was caught by IR35 post April… thanks, good bye.

  5. Ms AJB Contractor

    I have been offered 5 contracts in the Public sector as have worked previously for them all before. Asked if inside the IR35 rule and told yes. I reported back not willing to work at this rate within IR35. We need to keep rejecting until the daily rate gets driven up or HMRC re thinks their policy.

  6. Mike

    I have recently been offered a role in the public sector, a 6 month contract. I asked if inside or outside of IR35. Was told they did not know I said I would accept upto end of this FY. Then I could make informed decision on if I wish to continue or not dependant on IR 35 but was told if it came that I was inside IR35 I would retrospectively be liable for Tax and NI. Not sure if that’s s is correct or not so I declined the role

  7. d

    Turned down a 2 year gig public sector which was a critical long term assignment. I think it’s going to hurt soon and force a rethink.

  8. Eleanor Orr

    Does this apply to teachers working as supply in state schools?

  9. Steve

    I’m working for an American company which in turn works for a governement agency.. I won’t be renewing my contract at the 31st March.. I’d rather sit at home and not work than pay excessive amounts of tax. Thinking of retraining as an electrician / plumber… In comparison over the last 8 years their rates are now equal to mine which before were a third of mine.. and they get to live at home.. I see my home 2 days a week

  10. Steph

    I already pay 20% corporation tax on every thing my company earns before I take out expenses… My expenses for the hotel alone were over 12k last year and its only a basic hotel.. 5% max expenses make working for my current contract after April impossible.. There is at least another years work and if my agency doesn’t increase the rate by £100 (30% increase) a day or let me work from home.. else I have to give it up as I would be working for less than the junior and I’m far too old to take that sort of pay cut.. I don’t want to live away from home all week and live in a hotel..

  11. euwestdos

    I’d love to help the gov in delivering projects key to UK infrastructure and people.
    However, with new taxing rules from April, I would rather focus on non-gov projects both UK and abroad.
    Main reason is being taxed as a permie but with zero employee rights and benefits.

    It’s happening, contractors in public sector are now exiting ahead of time.

    I’m triggering article 35.06.4 aka PSexit.

  12. The Q

    As I have said elsewhere previously, the big concern on the exodus (in addition to the impact on state sector ICT systems) is the govt claiming there is now a skills shortage and opening the flood-gates on overseas recruitment.

    All this aggravation because no UK political party has the balls to say :

    1. Disguised employee = disguised employer

    2. Disguised employment is industrially exploited by BIG business, not the small (so harrass the former, not the latter) .

  13. Richard England

    Turned down three public sector roles inside last 3 weeks.

    One in West Yorks requiring CCP (CESG) certification and security clearance, which I have. The agency was unsure about IR35 status, so I took indecision to mean ‘inside’. I know two other CCP contractors who declined the same role.

    Another was for HMRC in Telford as a Security Architect. That got a ‘since Autumn Statement, no longer working in public sector’ reply. As if I would work for HMRC!

    Last one was in public sector for a government dept but the agency wouldn’t say who for. Might have been MOD or Cabinet Office. That was for a cyber role. Once again the agency couldn’t determine IR35 status, so declined. Another agency approached a few days later and got the same question and response after their wavering.

    Seems to be plenty of private sector work around. I reckon it will go bonkers with the new financial year.

    I think the HMRC have likely not performed an impact assessment before introducing these rules, and don’t understand the nature of some contractors, particularly those in IT Security/Cyber Security.

    I suspect that in time (like in the next few weeks) those engaged in CNI (Critical National Infrastructure) work/monitoring/policy are going to throw a hissy fit about access to highly skilled consultants finishing/being curtailed.

    We won’t get to know what happened, but I wouldn’t be surprised if either The Treasury takes it upon itself to resolve issues, or The Cabinet Office does it, or even someone like Robert Hannigan CMG, the head of GCHQ. I imagine some HMRC folk will be interviewed in their office by people they wouldn’t have been advised to ever meet in their careers.

  14. A.N.Other

    Identical circumstances to the other postings.
    I have asked if the contract is subject to IR35 – Agency does not know.
    So I have asked if I will be subject to Supervision, Direction, and Control.
    Agency has gone back to Govt Department and asked them.
    It is fair and reasonable when being offered a contract you should establish the terms.

  15. A.N.Other

    I was told yesterday that all nine IT Contractors at Bank of England have resigned and walked out.
    Any news elsewhere please?

  16. Chris

    Please spread it around

    Petition: Scrap IR35 legislation reform proposals for public sector off-payroll workers.
    https://petition.parliament.uk/petitions/170118

  17. Kris

    I have got some long term contract oppartunity for Home offfice. I have to reject as this is govt. body and off-payroll will cost me alot. It is not worth working in public sector/govt body IT Projects.

    So have to reject any govt. contract roles from APR-2017.

    Looking for only Private Sector roles.

    Share : Scrap IR35 legislation reform proposals for public sector off-payroll workers.

    https://petition.parliament.uk/petitions/170118

  18. breddi

    Is this rule only applicable for contractors in public sector?

    If yes, why only public sector? why not private sector?

    Am I missing something?

    • Effrafax of Wug

      Some say it’s a dry run for applying it to the private sector too, but for now it’s public sector only because that’s what he said in the Autumn Statement.

  19. breddi

    Is this rule only applicable for contractors in public sector?

    If yes, why only public sector? why not private sector?

    Am I missing something?

  20. Effrafax of Wug

    I’ll be running this up to the wire with my public sector client but even now they are as much in the dark as my accountants because HMRC is issuing no guidance.

    Am I being too naive and optimistic if I take that as a sign of a rethink rather than incompetence?

    If it goes ahead then that’s 3 years of work ended prematurely because the Treasury can’t engage brain before acting.

  21. sparkly

    So, I left a govt. contract in December because of IR35 risk post April 2017 . I now have new contract (deemed to have working practices outside IR35) with private tech company, on a project for a phone company, where the end client is – wait for it – govt. The agency has now said they may deem contract to be inside IR35 post April, as ultimate end client is govt. Anyone else think they’re not a public sector contractor and now being done up by a recruitment agency?

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