IR35 and the public sector - really?
As an update to the previous blog article, Crushing the Flexible Workforce, HMRC have now opened their consultation for the reform of IR35.
To recap, the proposal is that from April 2017 where a public sector body engages a PSC through a recruitment firm, or other third party, the party closest contractually to the worker's ltd company in the supply chain will be required to comply with the rules. That is to say, it is no longer the worker / worker's ltd company that decides whether or not IR35 applies, but the engager (public sector body), recruiter or third party.
To read more detail, please refer to the government's consultation document:
I'll close by reiterating my final points from the previous blog:
I see many issues with this from the word go, including:
-The private sector will find itself competing on an uneven playing field, struggling to attract the best talent (and in particular, the NHS, who are already hand tied with rate caps – an honourable but faulty attempt to control spend). The Government seems to miss the fact that contracting does not come with the benefits of employment (sick pay, pension, holidays, maternity pay, employment protection etc etc) and therefore has to pay more to compensate)
-Can a third party really be responsible for paying the tax of another company
-Are contractors really going to want to provide all the information required to enable RTI reporting on their behalf. It was hard enough to get the information required for the HMRC intermediaries legislation reporting (ie home address, DOB, NI etc) from contractors who, for 20 years, were used to just supplying the Ltd co. info.
And one thing that is surely never taken into account when making these sweeping changes is the cost to the economy of the time and effort taken to comply, which must surely outweigh and increased tax revenue. In a supposed world of reduced red tape, yet another sledgehammer is being wielded to crack the proverbial nut.