Personal service company freelancers contracting in the public sector have been urged to check their IR35 status to counter the confusion sweeping through public sector bodies (PSBs) following the implementation of reformed IR35 legislation on 6th April.
The controversial changes met with widespread opposition from professional bodies representing contractors and recruiters during the consultation phase. Trenchant critics included Umbrella Company trade associations the Freelancer and Contractor Services Association (FCSA) and PRISM, Umbrella Company consortium Unitum, contractor body the Association of Independent Professionals and the Self-Employed (IPSE) and recruitment bodies the Recruitment and Employment Confederation (REC) and the Association of Professional Staffing Companies (APSCo).
However, the IR35 changes are now in place, with the result that thousands of contracting professionals engaged by PSBs are likely to be redesignated as within IR35.
PSBs are now responsible for determining a contractor’s IR35 status, but there has been immense confusion about how to assess this accurately. Many contracting professionals are already finding themselves placed in an inaccurate tax bracket as PSBs adopt a blanket risk-averse policy and reclassify their contractors pre-emptively as within IR35.
HMRC’s online Employment Status Service (ESS) tool, belatedly released only weeks before the changes took effect, has been widely criticised over its accuracy. Its delayed release has contributed to the blanket approach that many PSBs have been driven to adopt in the absence of clear guidance beforehand.
As many contractors have become casualties of the panic-driven blanket approach to IR35, IPSE CEO Chris Bryce is advising those who find themselves summarily redesignated as inside IR35 to use the ESS tool, despite its flaws, and show the results to end clients.
Noting the multiple media reports of chaos in the NHS and mass walkouts at the Revenue, he maintained that the current mayhem was entirely avoidable. Had PSBs been granted sufficient time to prepare for and adhere to the guidance set out in the ESS tool, Mr Bryce said, the pervasive confusion and uncertainty would have been avoided.
He went on: “We urge all contractors in the public sector to complete the test and take the results to their client. This is the only way contractors can get fairness and clarity. HMRC has said it will stand by the results of their ESS tool, and IPSE intends to hold them to this.”
Lauding contractors for the invaluable expertise that they bring to so many PSBs, Mr Bryce observed that there is now a “very real concern” that many will embark on an exodus to the private sector. He concluded: “The Government and those public sector organisations deploying blanket approaches must be very wary of the messages they are sending.”