Public sector IT contractors are facing bleak times following what looks like government panic and media hysteria over high-level officials working through personal service companies; however, there may be an alternative to jumping ship to the private sector.

We reported recently on the PCG’s robust condemnation of government plans to force public sector contractors who work through limited companies and earn over £220 per day to operate within IR35 or face the termination of their contracts. The measures are scheduled to come into effect on 15th September. Given the fact that most specialists in IT contracting earn at least £375 per day, the plans look set to hit government IT projects very hard and an exodus of experts towards the private sector is by no means unlikely.

The PCG has warned that the measures could well bring about a gigantic knowledge and skills gap in the public sector, as the government tries to look tough and indignant about contractors following the media’s Ed Lester frenzy. PCG MD John Brazier did not mince his words, declaring:

“This is now attacking legitimate contractors who have done nothing wrong and are taking the brunt of a panic-stricken government and an HMRC who have launched a witch hunt.” He added that contractors “are essential to delivering vital public services and they are being treated in a scandalous way. The repercussions for operation of government are potentially catastrophic.”

There is, however, another alternative for IT contractors in the public sector: join a good PAYE umbrella company instead. This obviates the requirement to register for IR35, as HMRC designates such contractors as employees of the umbrella service. Well worth a try, we think.

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