From April 6, the start of the new financial year, there was a controversial change in the way IR35 status determinations are made in the public sector.
It is now the task of the public sector organisation to determine the IR35 status of engagements rather than the contractor, as was previously the case. If the public sector organisation deems the engagement to be inside IR35, they apply taxes to the contractor in the same manner as an employee.
Before and immediately after these changes, there has been considerable uncertainty and confusion. Many contractors find themselves being placed in an inaccurate tax bracket.
HMRC’s online Employment Status Service (ESS) tool, released last month, was designed to provide clarity around IR35 status and was assist public sector clients and agencies in making IR35 determinations. Howebver, it too met with much criticism and queries over its accuracy.
Because of prolonged delays, many public sector bodies have been taking a blanket approach to all their contractors and incorrectly deeming many engagements to be inside IR35.
Freelancer group, IPSE is advising all contractors in this situation to use the ESS tool and show the results to their clients.
Chris Bryce, IPSE CEO, said: “There have been numerous reports in the media of mayhem in the NHS and mass walkouts at HMRC. However, all of this was completely avoidable. If public sector organisations were given sufficient time to prepare and followed the guidance laid out by HMRC’s ESS tool, the widespread confusion and uncertainty could, and would, have been eased.
“We urge all contractors in the public sector to complete the test and take the results to their client. This is the only way contractors can get fairness and clarity. 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.
“Contractors provide great value and expertise to so many public sector organisations and it has now become a very real concern that there will be a major drain of talent moving away from the public sector. The Government, and those public sector organisations deploying blanket approaches, must be very wary of the messages they are sending.”
More information about the IR35 changes in the public sector is available in the News on IR35 section of Shout99.
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Susie Hughes © Shout99 2017