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IR35 – Are agencies and the public sector prepared?

Just 4% of UK contractors believe agencies and public sector prepared for 6th April.

With only a week before the IR35 changes in the public sector are live, there is still widespread concern in the contracting industry. The final legislation has now been published, which most notably features greater accountability on public sector bodies for determining the IR35 status of their contractors.

Public sector bodies must now provide their determination to the agency, or contractor if direct, on or before the start of the contract, which puts the ESS into question in how the working practices can be assessed prior to working. For those already in contracts prior to 6th April, the determination will need to be provided by the first payment after this date. Failure in the public sector body taking this “reasonable care”, will result in the public sector body becoming the fee-payer.

With such a short time frame for this provision to be added to the legislation, it is of no surprise that despite hopes for fairness when it comes to deciding IR35 status on public sector contracts, just 4% of UK contractors believe recruitment agencies and public sector companies are prepared for changes on 6th April, revealed Qdos Contractor.

As soon as next week, public sector companies will be handed responsibility for determining IR35 status – a move that will leave agencies liable.

Research into 2000 UK contractors by specialist contractor tax advisor, Qdos Contractor highlighted:

  • Just 4% believe agencies and public sector companies are ready for incoming IR35 changes.
  • 80% of contractors believe recruitment agencies and public sector companies are unprepared for public sector IR35 changes.
  • 16% are unsure how prepared agencies and public sector engagers are.
  • Just over half (50.29%) of agencies and public sector companies have not made contact with contractors regarding the changes.
  • Just under half (49.71%) of agencies and public sector clients have made contact with regards to IR35 changes.

Qdos Contractor CEO, Seb Maley, commented:

“6th April is only a week away, and many recruitment agencies and public sector companies are still unsure about what to do when IR35 changes come into force.”

“That almost 1 in 2 contractors has not been contacted by their public sector clients or agencies perhaps signals why confidence is low. Understandably, contractors are concerned about being wrongly caught by the new rules, with 85% planning to leave their public sector roles should they be placed inside IR35.”

“Given the sheer number of contractors and agencies concerned, not to mention projects and public sector companies that rely heavily on the contract workforce, the situation needs clarity and a solution. It’s vital that well-informed, accurate IR35 decisions – with input from every party – are made and fast, to put minds at rest.”

The person in receipt of the determination from the public sector body may raise questions in writing to the public sector body and the final legislation now contains a 31 day deadline for the end client to respond. It is worth noting, however, that there is no requirement for the public sector body to provide information beyond the next entity in the contractual supply chain.

By Contractor Weekly


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13 thoughts on “IR35 – Are agencies and the public sector prepared?”

  1. PD74

    Here is the rub. If someone was genuinely a contractor then there would be no change to their status. So far almost all my public sector clients have been told to go on payroll/umbrella. That means either the public sector HR don’t know what they are doing or they were trying to avoid paying taxes. My guess is that it is the former rather than the latter. The government keeps piling on new rules and yet it is clear that most government agencies don’t understand existing rules!

    • G

      The 3rd option is that due to all the uncertainly and controls in place, choosing to class contracts as inside IR35 is the easy and safest option. It will ensure that there will be no future demand for tax and NI if the end client has got it wrong.
      It’s all a shite.

      • PD74

        I am aware of why the public sector bodies choose to do what they do. But you wouldn’t put a plumber who comes in to fix a radiator onto the payroll, which is now what is happening.

        The agencies and those who represent the public sector don’t know what they are doing. Going to QDOS or the ESI tool at HMRC get your contract reviewed and if they say its outside of IR35 then you carry on as before. What you don’t do is assume all your contractors are employees. I have a doctor who will now be put on the payroll every time he goes to a different trust. Sometimes his contract will be for one day. So the trust will set him/her on the payroll for a days work. His rates will have to increase and think of the paperwork of employing him and producing a P45 for one days work.

        Does anyone think through what they are doing.

  2. Philip Drake

    Can contractors strike? I have never taken part in strike action, I’m 63. What action needs to be done to start a strike. There is no union, so no vote can be taken. Do we just agree a date and withdraw our labour?

  3. Ex-con

    Beng prepared is not the issue – will they get it right? That’s the question.

    Seeing public sector contracts now being offered at £850/day but stated up front as being Inside IR35.

    When you do the sums, that’s less take-hoe than £600/day outside IR35 so don’t get excited.

    So – “being prepared” is simply ducking the issue by declaring all contractors caught.

    But.. the private sector can’t do this. For a govt it’s just a case of recycling tax cash – you pay more out, you take it back as tax. Net effect, roughly zero sum (departmental budgets aside).

    For private sector this is a real cost, so simply declaring this a success in the public sector and rolling it out to the private sector (as they probably will do) is wrong. It will play out very differently in each sector for those reasons at least.

    I can’t get a contract reviewed at the moment because all are up to the eyeballs in public sector reviews. I hope everyone walks out and leaves them wondering how to replace their flexible labour force – because that’s what they are destroying. Welcome to The New Greece! 🙁

    • KGD

      “For a govt it’s just a case of recycling tax cash – you pay more out, you take it back as tax. Net effect, roughly zero sum (departmental budgets aside).”

      Actually if you think about it central government are being quite canny here. The extra funds will be paid out by the local authority / NHS / other public sector body, but the tax will go back to the treasury. Effectively the government have now applied a stealth tax to their own departments and local authorities, reducing their budgets without actually appearing to have done so!

      Maybe this should be pointed out to the various governmental departments so they can raise hell and prevent this debacle from being hailed as a success…?

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