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Although the new guidelines are not due to come into force until mid September, members of agency representative body, APSCo, are reporting that contractors are cancelling interviews and moving into private sector roles, .
The new controls within the public sector require that the most senior staff must be on the payroll, unless there are exceptional temporary circumstances, and that departments will be able to seek formal assurance from contractors with off payroll arrangements lasting more than six months and costing over £220 per day that income tax and national insurance obligations are being met.
The clampdown follows adverse publicity about some senior public sector workers such as Ed Lester, head of Students Loan Company, who was remunerated through his own company allegedly to mitigate tax and national insurance payments.
APSCo said: "There is understandably a great deal of concern and confusion surrounding this issue, and we feel that clarification is required from Government very soon to avoid large numbers of contractors choosing to move into the private sector rather than, as they see it, being required to relinquish responsibility for deciding their own tax affairs.
"Many contractors are assuming that the guidelines will require them to operate PAYE on their income from public sector assignments. In the majority of cases this is unlikely to be the case. Our understanding is that the contractor will have an opportunity to show that they are operating IR35 (if appropriate)."
Business tests
There has been no confirmation as yet regarding how the various Government departments will implement the proposals. Although reports suggest that the controversial business entity tests which are used to determine IR35 risk may feature. (See: Government requires proof of its contractors' status - Aug 2012, Shout99).
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"It is also extremely unclear what the Government will do in respect of the results of the Business Entity Tests, there are some suggestions that 'medium and high risk' results will require the individual’s assignment/working arrangements to be investigated by HMRC.
"This clearly sounds extremely alarming to any contractor. However, APSCo has sat on HMRC’s IR35 Forum for over a year, and we do not believe that HMRC has the resource or structure within its IR35 team to deal with that level of investigations. We also doubt very much whether Government is 'joined up' enough to actually facilitate that kind of cross departmental communication."
APSCo also express its concern about whether the recruitment industry would have to undertake more responsibility for determining the employment status of contractors.
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Susie Hughes © Shout99 2012
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