Tax & admin · 11 April 2017

Public sector contractors urged to confirm IR35 status

NHS
Some NHS workers are among the public sector contractors affected by IR35 rules

To avoid uncertainty and confusion surrounding newly implemented public sector rule changes, the Association of Independent Professionals and the Self Employed (IPSE) has advised contractors to check their IR35 status.

The body representing independent workers and the self-employed made the call amid concerns that many public sector contractors may find themselves in an inaccurate tax bracket.

A change to the way IR35 status determinations are made in the public sector, introduced on 6 April, means it is now the job of the public sector organisation itself to determine the IR35 status of contractor work, rather than the contractor themselves.

In future, if a public sector organisation considers work done by a contractor to fall in line with IR35, that organisation will apply taxes to the contractor in the same way it would with employees.

HMRC’s IR35 rules are a set of measures affecting individual workers’ tax and national insurance contributions if contracted to work for clients via an intermediary – a partnership, service company or one’s own limited company, for instance.

A new online tool, released last month by HMRC, was designed to provide clarity for public sector firms and agencies around IR35 status.

The Employment Status Service (ESS) tool saw its rollout delayed, and many public sector bodies gave since adopted a blanket approach, incorrectly classifying all contractor work inside IR35 rules.

IPSE CEO Chris Bryce urged contractors to make use of the ESS, taking results to their public sector clients. “We urge all contractors in the public sector to complete the (ESS) test and take the results to their client. This is the only way contractors can get fairness and clarity,” he said.

“There have been reports in the media of mayhem in the NHS, and mass walkouts at HMRC, but all this was completely avoidable. If public sector organisations were given sufficient time to prepare and followed the guidance laid out by the ESS tool, the widespread confusion and uncertainty would have been eased.”

“HMRC has said it will stand by the results of their ESS tool and IPSE intends to hold them to this. If the government are going to make such substantial changes more time should have been given to allow all affected parties to prepare.”

HMRC’s IR35 status tool for contractors could be enabling tax avoidance.

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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