In one fell swoop, April’s rather unwelcome reform to public sector IR35 took away a contractor’s privilege to set their own employment status when working on public sector contracts.
Now, without much say in the matter, many public sector contractors wait nervously as IR35 assessments are made by relatively inexperienced clients and agencies, often with the help of HMRC’s questionable IR35 tool. It’s little wonder there was such concern in our sector the moment these changes were announced.
Contractor’s ill-feeling towards IR35 itself, the reform (and HMRC for that matter) is entirely understandable. That employment status decisions and in-effect, the responsibility of setting IR35 status should be taken away from the contractor and passed over to a public sector engager has been a bold, but ultimately unpopular move.
This is reflected in our latest contractor research, which has revealed that as many as 88% of contractors surveyed do not believe public sector companies or agencies are able to make accurate IR35 decisions without their input. It’s logical thinking. After all, how can one make a well-informed IR35 decision without valuable input from what is undoubtedly the most vital component – the contractor?
Granted, HMRC’s ESS Tool is being continually tweaked on-the-fly in an attempt to iron out its inconsistencies. But many simply view this as a root of its problems, rather than a solution to them. That HMRC’s ESS Tool has clearly been built with the end-engager in mind is a shortcoming. Greater collaboration between contractors and end engagers is needed to be sure of more accurate IR35 decisions. It’s obvious.
If as a public sector contractor, your client or agency is using HMRC’s ESS Tool to set your IR35 status, it’s important that you have carried out a separate and unbiased IR35 review – whether that’s to appeal against an IR35 decision, or simply to keep for your own records. As we all know too well, IR35 is a complex subject, so independent and expert advice will make things easier for you.
It’s clear that reform to public sector IR35 has made working on these contracts an altogether less attractive proposition. Our research also suggests that of the contractors with experience of working in the public sector, 66% do not intend to again.
That two thirds of contractors are not interested in working on public sector contracts again is obviously concerning, not just for contractors, but for the public sector too. But it’s worth bearing in mind, that this figure once sat even higher (85%) prior to April 6th, the day on which changes were enforced.
On that note, it’s important to take into account that change is afoot. And slowly but surely, a growing number of public sector organisations and agencies who – on 6thApril – were quick to make widespread IR35 assumptions in an attempt to safeguard themselves, have realised this is not the way forward.
Faced with a contractor exodus on their hands, numerous public sector bodies have reassessed their original stance on the contractors they engage.
The NHS Trust was perhaps the most obvious example. After placing its entire contractor and locum workforce inside IR35, The NHS Trust reversed its original decision, and promised to start assessing contractors individually and on a ‘case-by-case basis’. That a public sector organisation the sheer size of The NHS has reconsidered its position could be influential in paving the way for others to follow suit.
Whether this means end engagers are reaching a position where they realise the value of including contractors in IR35 decisions remains to be seen. However, we are working hard to ensure this is the case.
The reversal of several blanket IR35 determinations is undoubtedly an important step forward in ensuring each public sector contractor is given a fair and individual assessment at least.
Having spent considerable time preparing for public sector reform, and building a unique solution to manage it effectively, Qdos Contractor provides IR35 reviews with well-informed outcomes based on information collected not just from public sector clients and agencies, but contractors too.
Going forward, and regardless of whether a contractor should sit inside or outside IR35, it’s absolutely essential to have a clear audit trail and the input of both the contractor and the client in the process. And that goes for both the public and the private sectors.
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