Another prominent trade body has hit out at HMRC’s proposed reform of IR35 regulations in the public sector.

Following the release last week of the Revenue’s consultation document on its planned changes, the Association of Professional Staffing Companies (APSCo) has dubbed the approach “unworkable, disproportionate and unreasonable.”

The blunt words come from APSCo’s Operations Director, Samantha Hurley, who noted that current rules allot responsibility and liability for determining the IR35 status of a contracting assignment to individual workers and the Personal Service Company (PSC) through which they provide their services. But from April 2017, recruitment agencies will become responsible for this duty whenever a PSC is used to supply services to a public sector organisation. Should HMRC find fault with their decision, they will become liable for unpaid NICs and taxes. Yet, recruiters do not have access to viewing the day-to-day operations of either the worker, the PSC or the end client.

Ms Hurley continued: “…they would not typically be present at a client’s site and would consequently have no visibility of the role undertaken or how the services are performed. The recruitment firm would have to rely on other parties to provide them with up to date information during the whole assignment – information which would be required to ascertain tax status on a real time basis. This is clearly unjust as they could end up bearing penalties attributable to other people’s lack of disclosure and conduct over which they have no control.”

APSCo believes that, unable to shoulder an unknown liability, recruiters would be forced to assume that the PSC contracting worker is outside IR35. The result would be large numbers of contractors being designated as falsely employed.

Ms Hurley added that the public sector will almost certainly lose access to contracting professionals’ much-needed skills because they will become too expensive, leading these workers to switch to private alternatives.

The public sector, APSCo believes, has serious concerns over its ability to find the skills and services it needs to complete its many major infrastructure projects, which include the massive digitalisation programme.

Yet, Ms Hurley said, HMRC is not even consulting on whether it is fair and reasonable to transfer responsibility for the public sector’s own tax duties to a private third party.

She added: “If these proposals are a dry run for the private sector then we fear for the whole future of the flexible workforce.”

Ms Hurley omitted to note that an alternative to the PSC model exists, which leaves both contracting professionals and recruiters with peace of mind in relation to tax: Umbrella Companies automatically pay all tax and NICs on a contractor’s income on a PAYE basis.

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