The success of the HS2 railway network will depend on accurate IR35 assessments for contractors, a leading industry expert has warned.
The project will be heavily dependent on the contributions of contracting professionals. The Government has awarded a princely £6.6bn in contracts for the high-speed railway, which is expected to create 16,000 new jobs as phase one begins.
However, controversial new IR35 rules could seriously hobble the project. Introduced in April against a flurry of condemnation from a range of professional bodies representing contracting professionals and the staffing industry, the new legislation targets contractors working for public sector bodies (PSBs) through their own personal service companies. Billed as an anti-tax avoidance measure, it aims to re-designate many more independent professionals as employees for tax purposes only.
Responsibility for determining a contractor’s IR35 status has been transferred from the contractor to the public sector hirer or recruitment agency. Many genuinely independent professionals have already found themselves reclassified as employees and liable for employees’ NICs and income tax, despite receiving none of the statutory employment benefits that these taxes pay for.
HS2 will require large numbers of highly skilled, expert contracting professionals to fill some of the roles now opening in the companies that were awarded the £6.6bn to build the first phase of the railway.
According to Seb Maley, CEO of Qdos Contractor (a tax advisory service for contracting professionals), these companies and the recruitment agencies involved will need to take considerable care to make accurate IR35 determinations on such a large scale.
Hailing the creation of 16,000 new jobs as positive news, Mr Maley urged the companies tasked with building the initial phase of HS2 to capitalise on the expertise and flexibility of the country’s professional contracting workforce.
Mr Maley underlined the controversy simmering over the total cost of HS2, which he said makes it essential for the companies involved to use their budgets judiciously and reach out to the country’s highly skilled, highly flexible contractor workforce.
He raised the findings from Qdos Contractor’s own research, which revealed in April that 85 per cent of independent professionals contracting in the public sector had been prepared to stop working for PSBs if they were re-designated as “inside” IR35. This makes it critical that fair, accurate and timely determinations are made around contractors’ employment.
He added: “The ongoing public debate and huge investment in HS2 means there is no room for error when it comes to deciding whether a contractor sits inside or outside IR35. Inaccurate IR35 decisions would not simply risk contractor involvement in the project, it could go as far to jeopardise the very success of HS2 itself.”