IR35 in the Public Sector – still not understood (by the public sector)

IR35 in the Public Sector – still not understood (by the public sector)  

Many of you may have read a couple of recent articles I wrote titled ‘The (un)intended consequences of Off Payroll changes in the public sector!’ and ‘The Farce that is IR35’.

Something I mentioned in these articles was the lack of clarity provided to the public sector by HMRC, with almost zero time for the entire industry to be ready, and thus blanket decisions being taken on contractor statuses. Many of our NHS trust clients pushed out communications something like this:

We have already undertaken some work in this respect.  Initial assessments of placements have indicated that they are all deemed to be caught under the new IR35 rules. We, therefore, consider the most prudent approach to take post April 2017 would be to treat all engagements/placements as falling within the scope of the new rules.  This will significantly reduce the level of administration and communication between us.

What I hadn’t mentioned was that most of these communications were based on direct advice from NHS Improvement, the body responsible for overseeing foundation trusts and NHS trusts, telling the trusts to make these blanket decisions and deem ALL contractors inside the legislation. We then had to spend weeks and weeks working with our clients to unravel this misunderstanding and ensure that they took reasonable and proper care in making the decisions on status.

Now after battling through the first couple of months of the wrong status, unfair and incorrect taxation, contract rate changes, contractors leaving roles, trusts losing critical contractors etc etc, NHS improvement has now released new advice, completely contradicting what they originally advised (I am pleased to say that this is a necessary and correct contradiction!).

This just compounds the frustration felt regarding the handling and implementation of this entire fiasco, the lack of communication across government departments, HMRC, public sector bodies, and the entire contract community, and also highlights that fact that this legislation was clearly ill-conceived from the start and certainly should never have made it to statute.   

I just pray for those that benefit from the fact that the UK has a tremendous pot of skills in our flexible workforce, that some sense is seen before someone decides that this has worked and it’s time to push it through to the private sector. That will be an even greater disaster.