The group says it has seen leaked papers 'where the draconian measures outlined will render freelancing within the public sector almost impossible and according to sources within the sector could destabilise and undermine the foundations of some of the UK’s most important public sector departments.
The leaked documents detail measures which maintain freelancers on a day rate of £220 plus and on contracts over six months, will be made to operate IR35 or have their contracts terminated. It is seen as HMRC’s outright war on freelancers and contractors working through their limited company in the public sector.
According to John Brazier, MD of PCG, the damage caused by the actions of the Government should not to be underestimated. Mr. Brazier said: “The harsh reality of this move will be to remove public sector access to freelance expertise and bluntly threatens to destabilise many Government Departments. It is vitally important the Government does not undermine the UK’s vibrant flexible workforce. The phrase ‘throwing the baby out with the bathwater’ comes to mind when you read these proposals.
“This has gone a way beyond Ed Lester the Head of the Student Loans Company who was clearly a case of false self employment; this is now attacking legitimate contractors who have done nothing wrong and are taking the brunt of a panic stricken Government and an HMRC who have launched a witch hunt. These people are essential to delivering vital public services and they are being treated in a scandalous way. The repercussions for operation of Government are potentially catastrophic.”
Under the new guidance, PCG predicts that thousands of experts engaged on short term project work will be forced out, leaving bodies like the NHS and the Ministry of Defence without access to vital resources such as IT contractors and healthcare professionals.
The assurance guidance, which comes into force from September 15 2012, centres on proper engagement of freelance resource in an ‘off-payroll’ capacity. Unfortunately, according to PCG’s sources within the public sector, the nature of the ‘business tests’ recommended for use within the guidance combined with huge financial penalties for any public sector body found to be contravening them have resulted in almost no room for legitimate freelancers to exist.
John Brazier said: "I do not believe the Government fully understands the consequences of these measures. PCG will do its best to highlight these issues to Ministers and MPs. They will also work tirelessly to protect legitimate freelance businesses in the private sector.”
The spotlight shifted on freelancers in the public sector after significant media criticism of Ed Lester, Head of the Students Loans, and other senior figures who were operating through limited companies while working full-time for Government or other public sector organisations. The outcry led to a review which in turn resulted in a new policy from the Government to take tax and NI payments from all individuals at source who were 'controlling persons' or integral to the organisation for which they worked.
It has been feared that freelancers in the public sector could be caught up by this move.
For general coverage of IR35 policy, cases and the background to this public sector row, see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2012