IR35 is about to cost the public sector big time

Whilst Brexit has been dominating the headlines; quietly a piece of legislation has been passed and will come into force in April that is being applied in the public sector. The legislation is called IR35 and whilst it has been around for some time, the aim of the latest release by the government is to ensure contract workers in the public sector pay tax as if they were a full time employee.

The way IR35 has been explained and left for the public sector and IRC to apply leaves a lot of questions; and is no doubt going to cause a lot of confusion and turmoil.

Britain has one of the most dynamic work forces globally; the flexibility and skill sets of people has pulled the country out of recession faster than even the analysts could predict. And part of the mix of this workforce is the contract worker.

At a time when the country needs assistance to work Brexit through the civil service offices, support the NHS, deliver infrastructure contracts, contractors may instead in numbers turn their back on the public sector, likely resulting in the large consultancies such as KPMG, Deloitte, E&Y and PWC being contracted to prevent public sector offices from drowning in paperwork and projects from failing, which in turn could cost the government and tax payer further.

With Brexit looming, healthcare stretched, the inland revenue consolidating, public services in disarray, and public sector organisations needing to transform; the need for consultants to provide essential skills and up skilling of public sector staff is higher than ever.

Part of the problem for the public sector is that public sector jobs simply do not pay the rate that highly skilled and experienced people are looking for; so the public sector is required to reach out to specialists.

Instead of applying IR35 to contractors that are obvious full time equivalents; the legislation is about to sweep up a whole number of independent consultants too. The idea from government is a hash attempt with a broad brush stroke from and a chancellor that hasn’t thought the whole picture through. Nor does he appreciate the life of a contractor, or the impact it is going to have.

It is absolutely the wrong time to apply IR35.

On the outside you may think this is fair and justified, but when you start to look into the lives on contractors you find it is a different story.

Contractors are some of the most highly dedicated and efficient skilled workers. Often travelling late into the evening or weekends, staying away from home, and moving from role to role, they fill a skills gap that the country so desperately needs to keep the wheels oiled and turning. Instead the government with one piece of poorly explained and applied legislation is about to penalise them and their families.

Most contract roles are specialist and require travel away from home, contractors with their own limited companies are able to deduct travel and accommodation costs before tax as any company can. But under the new IR35 legislation, everything is taxed at source so one is effectively treated as an employee without the benefits that full-time employment offers; no holiday pay, no sick pay, no training paid, no pension paid et al.

During March, April and onwards when many hundreds, if not thousands are forecast to walk away from the public sector, and as the public sector bosses go running to the government in April due to the whole they are left; let’s see if the government listens or responds. This will either end in short term upset and turmoil that could have been avoided or longer damage that will be harder to repair.

Whereas some multi-nationals that perform business in the UK pay next to no UK corporation tax and run amok, Mr or Miss independent contractor who pay’s their full corporation tax obligation is penalised furthermore.

The bottom line is, if your role is equivalent to a full time equivalent position then IR35 is sure to apply to you soon.

Read the latest government IR35 articles here: GOV UK IR35

For contract roles search here: contract jobs