A specialist contractor accountant has advised high-end independent professionals contracting in the public sector to adopt a pragmatic approach to new IR35 regulations instead of all-out opposition.
Writing in the IT professionals’ journal ITProPortal, James Poyser, CEO of inniAccounts, acknowledges that IR35 has become “the most hated legislation in the IT industry,” especially after it was revamped this year.
Mr Poyser, however, reminds contracting IT professionals that there were good reasons behind the legislation when it was initially introduced 17 years ago. The Government saw that some professionals were switching from salaried employment to limited company contracting for the wrong reasons. Loyal public sector employees had begun noticing that the contractor sitting beside them was being paid more and paying less tax.
As Mr Poyser notes: “People cottoned on – I can negotiate to leave and come back as a contractor.”
Essentially, this was an attempt at tax dodging, he maintains, and IR35 was introduced to prevent organisations from engaging people indefinitely without having to pay the proper tax.
The Government, Mr Poyser writes, has made it abundantly clear that IR35 is not going away and has some justification for wishing to clamp down on abuse.
Taking contractors to task for being “fixated on knocking IR35 entirely,” he suggests instead that they should regard occasionally working inside IR35 as a “necessary evil” but one that doesn’t eradicate the benefits of flexible working. A better approach is to focus on pragmatic and fair application of the new rules and reaping the benefits of contracting.
Mr Poyser continues: “Because when you talk to contractors, paying less tax is much lower down on the list of reasons why people turn self-employed than you’d think; being at the school gate, sports day and the Christmas play, having time for an elderly relative, to train for marathons or do that art diploma you always promised yourself you’d do, finding more challenging and rewarding work that’s not offered to a permanent employee, travelling the world. They are the reasons why people do it. It’s about lifestyle. It’s about working to live, not living to work.”
These considerations, indeed, result in many contractors actively choosing to work via Umbrella Companies, secure in the knowledge that they’ll never face gruelling IR35 tribunals and content to have their tax and NICs deducted automatically on a PAYE basis.
Contractors coming across a perfect role with an excellent rate, an interesting project and a great environment, Mr Poyser says, wouldn’t dismiss it because it might be inside IR35.
Contracting in the public sector continues to be in demand despite IR35, and it will do in the private sector, too, if the rules are extended there.