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Challenge to Public Sector Discrimination

Judicial review of IR35 rules in the public sector on the horizon

Since the introduction of the rules for public sector appointees last year a number of government bodies appear to be disregarding evidence put in from of them and forcing contractors to operate within IR35 or work through an Umbrella company.

The rules were introduced after the Ed Lester fall out and require workers who are engaged through their own personal service companies to provide evidence to assure the relevant department that their income tax and NICs obligations are being met by way of one of the following:

Low risk IR35

To demonstrate that their PSC is at low risk of a HMRC IR35 compliance review by virtue of the business entity tests.  

Medium/High Risk

Again, by reference to the business entity tests, if a contractor is medium or high risk then they will be required to provide alternative evidence within a reasonable time. Evidence that takes the form of an independent review of the contract and working practices should be adequate but contractors' experiences tell a different tale.

A number of government bodies are simply not allowing the freelancer to pass 'go' and sending them straight to IR35 'jail'. Is this down to ignorance or that these departments are simply running scared of the repercussions of getting it wrong, or both?

It is also believed that some public sector departments will only accept a contract reviewed by HMRC.

Enough is enough for the Professional Contractors Group (PCG) who now plan to take the Government to task over the discriminatory attitude adopted by some of its departments by way of a Judicial Review.

Judicial Reviews are a challenge to the way in which a decision has been made and are not concerned with the conclusions of the process.

The PCG, who previously challenged the introduction of IR35 through Judicial Review albeit unsuccessfully, will foot the bill for the associated legal costs.

Chris Bryce, chairman of the PCG, has sent out a rallying call to members, seeking their commitment to the cause and to submit evidence of their experiences. In an open letter to members he wrote “Government Departments and their executive agencies now require contractors to provide assurance that their tax obligations are being met. In theory this seems reasonable enough but in practice, as many of you unfortunately know first-hand, it has caused a great deal of confusion, disruption and damage."

Mr Bryce went on to say, “PCG considers this practice to be unacceptable and has taken legal advice. We do not believe that a Government Department has the right to force our members to operate IR35 if their contracts are outside IR35. We want to challenge this by a pursuing a Judicial Review and we need members to come forward to supply us with real cases and allow us to represent them."

The PCG has previously demonstrated that there is strength in numbers and are to be commended for sending out a message to the government that they cannot run roughshod over contractors in this way.

By Andy Vessey


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2 thoughts on “Challenge to Public Sector Discrimination”

  1. jocko

    If the contract between the contractor and the agent explicitly states that there is no intention to create a state of employment between the contractor and the end client this should be enough to establish the reality of the relationship. It should not matter how long the relationship exists and the Government should not be allowed to reinterpret a freely entered-into contract for services. On this basis the Government could re-interpret the relationship of individual people who live together as “disguised marriage”. It is a complete nonsense and something the courts should sweep away with a warning that Government has no right to arbitrarily adjust the meaning of freely entered contracts to suit its own tax target.

  2. Leo Stevenson

    I have just accepted a new contract with Network Rail and have been forced to work within IR35.

    I had previously passed the IR35 compliance test on my last contract which was identical in terms of my working practices.

    I’m also confused as how to challenge this as the IR35 team working for Network Rail do not seem to be allowing any challenges to all the new contracting roles they are no releasing.

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