Impending IR35 Changes For Contractors In the Public Sector

IR35 Changes for Contractors

Working independently, for one client at a time, is a way of life for tens of thousands of skilled professionals in the UK. Contracting is a means of selecting the projects that suit your skills, goals and schedule, and defining them as your own business pursuits. IR35 rules have been making this distinction for almost two decades.

Yet this legislation is evolving, playing with some of the freedoms that a contractor may enjoy. Such changes are hitting the public sector in April 2017 – to prepare, here’s what’s expected to happen, and how it’ll affect you.

The onus is on the client

Ever since IR35 became part of UK tax law, contract workers have been assessing themselves on each project, ensuring they meet the standards of self-employment. However, from the 6th April, public sector contractors will no longer decide how they match up against the relevant criteria. That power falls to the end client: they will take over the responsibility of seeing where you fit for tax purposes.

If the client or agency thinks you qualify for IR35, the contractor will be taxed at source, in the same fashion as a typical employee. You will lose the lower tax threshold, and earn less cash.

If an agency is managing your tax affairs, they will go to the client for an informed opinion. They’ll have 31 days to give it. Both parties are liable to fines from HMRC if they wrongly classify a contracted worker to be outside of IR35.

A conservative approach to contracting

Any self-employed professional knows how knotty, complex and far-ranging such legislature can be. There’s a real danger that the source of pay – as in, the organisation you’re directly working for – will be baffled by the IR35 small-print. They are unlikely to have a cogent grasp of what on-site arrangements could mean, the leniencies regarding your autonomy, and other factors influencing the validity of your tax status.

This is because they’ll be tempted by the risk-averse option i.e. putting you straight on payroll when you’ve signed the dotted line. There’s a greater chance of messing up an IR35 submission, and suffering the consequences, than betting safe on a direct employment contract.

Of course, contractors who are deemed inside IR35 stipulation won’t get the benefits of a full-time employee. You know them well, assumedly – holiday pay, a pension scheme, and the option to challenge a dismissal. It’s possible that thousands of contractors will be landed in a no-man’s land of sorts: feeling the sting of higher tax payments, whilst staying bereft of the perks that a client would grant their full-time staff.

Considering the shift in IR35 stipulations, it’s imperative that you draw up fool-proof contracts with every job you take, plugging any leaks in your paperwork. DATS Recruitment (www.dats.co.uk) have years of experience in contract recruiting; our links to numerous sectors in the North West have exposed us to what really goes on with contract agreements, and how they can be addressed.

Get in touch if you’re concerned about IR35 in the public sector. Your earning potential rests on getting it right for the future…