In HMRC

A new study by contractor tax advisory company Qdos Contractor reveals that just four per cent of contracting professionals believe that their public sector body (PSB) end clients are ready to deal with IR35 changes, which are just days from taking effect.

From Thursday next week (6th April), PSBs will be obliged under the new rules to determine the IR35 status of all contracting professionals engaged via personal service companies (PSCs).

The findings are as follows:

  • Only four per cent of contracting professionals working with PSBs believe that the latter are prepared for imminent IR35 changes.
  • 80 per cent of the contractors polled believe that PSBs are unprepared for the changes.
  • 16 per cent say that they are uncertain about the readiness of their PSB end clients.
  • Slightly less than a half (49.71 per cent) of recruitment agencies and PSB end clients have contacted contracting professionals concerning IR35 changes.

Qdos Contractor CEO Seb Maley observed that many recruiters and PSBs remain unclear about what to do when the IR35 reforms take effect. Confidence among contracting professionals is low, he said, as nearly one in two have not yet been contacted about the effects of the changes by either recruiters or their hiring PSBs.

He added: “Understandably, contractors are concerned about being wrongly caught by the new rules, with 85 per cent planning to leave their public sector roles should they be placed inside IR35.

“Given the sheer number of contractors and agencies concerned, not to mention projects and public sector companies that rely heavily on the contract workforce, the situation needs clarity and a solution. It’s vital that well-informed, accurate IR35 decisions — with input from every party — are made, and fast, to put minds at rest.”

This week, the Association of Recruitment Consultancies (ARC) sent a letter to MPs alerting them to the striking anomalies in the approach that HMRC is taking to apply the new rules and calling for a delay in the legislation’s implementation.

Supporting the ARC letter, ContractorCalculator founder and CEO Dave Chaplin said that “the public sector is in chaos” over the rules and their inept handling by HMRC. He called for the measures to be delayed for a minimum of six months to allow adequate time for hirers to resolve this chaos.

Last week, online IT news source The Register reported that the IR35 reforms are likely to extend to the private sector in the coming few years, potentially threatening the PSC model of engagement. Gerry McLaughlin, CEO of online advice portal IT Contractor, said that large consultancies are already funnelling their contracted workers through PAYE Umbrella Companies ahead of this expected move.

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