The final details of new public sector off-payroll legislation, as contained in the Finance Bill and associated documentation, reveal the surprise ruling that public sector “end-users” (clients) will be responsible for determining whether IR35 rules apply to contracting professionals.

Also confirmed is that the recruitment agency or intermediary that pays the contractor shall be liable for paying tax if IR35 does apply.

The legislation has been heavily criticised as grossly unfair by a raft of industry bodies, including Umbrella Company group Unitum, Umbrella Company trade associations the Freelancer and Contractor Services Association (FCSA) and PRISM, 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).

APSCo’s General Counsel, Tania Bowers, said that HMRC appears to have heeded to her organisation’s lobbying arguments to legally oblige the public sector end-client to not only determine whether, when engaged directly, a worker is considered an employee for tax purposes but also to notify the intermediary.

This is a crucial point, Ms Bowers explained, as recruitment agencies must be clear about how much they may pay the worker and what models to use.

However, she noted that the legislation contains no time frame for when this information should be provided. The draft legislation permits agencies to request the determination if it has not been supplied and obliges public sector end-clients to provide it within 31 days. Agencies may also query the end-client’s decision, but again, the latter has 31 days to respond.

The wording of the draft legislation, she added, is not ideal. For example, there is no obligation on public sector end-clients to make the determination unless they simply fail to provide the information after receiving an agency request. Even so, the wording does at least confirm that the public sector end-client is the only party that should determine the assignment’s status.

Ms Bowers said that when any doubt arises, most intermediaries will consider contracting workers to be employees in order to minimise risk. Although contractors will be permitted to query decisions, she added, this will unavoidably lead to investigations being drawn out, which is not at all ideal.

She concluded: “However, the overall picture is a gloomy one. The UK’s ability to prosper in a post Brexit world rests on our capability to source highly skilled experts – often on a short-term contract – and on a just in time basis. Whether these independent specialists will still be available once the new rules are in place – and what impact this will have on our economy remains to be seen.”

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