IR35: Don’t leave it too late

Recently, I arranged a webinar aiming to increase contractors’ knowledge of the changes affecting payments made to personal service companies (PSCs) in the public sector, with IR35 being operated by agencies rather than PSCs. While the presentation, led by The Adecco Group’s Employment Tax Manager, was very well received, the Q&A session highlighted an alarmingly low level of understanding among some contractors about the legislative changes, which are due to come into effect on 6 April 2017. 

Let‘s be honest, the changes are a challenge for us all. Contractors will walk out with less money if they’re deemed inside IR35. And agencies are under pressure to keep contractors happy by finding ways to enable them to continue working outside of IR35, presenting a risk to those agencies of PAYE liabilities, penalties and interest.

In situations like this and when there is a very real risk that the terms of the worker’s contract will be changed, adopting the ostrich approach really isn’t the way to go. Candidates must be proactive by keeping themselves informed - and if it’s looking like they will be deemed inside IR35, it‘s vitally important to plan ahead. Will you continue via your PSC? Will you work through an umbrella company? Will you go PAYE? Will you actually leave your contract if faced with this scenario?

Naturally, there will be some ‘leakage’ from the public to private sector, which brings its own risks and problems to the public sector. It is a relatively safe assumption, however, that the majority of public sector contractors will continue to operate within that space, albeit under different terms.

And what’s to say that’s a bad thing? People have successfully forged careers as interims for years within the public sector and why can’t that continue? Of course take home pay will reduce if deemed inside IR35 but the figures being discussed aren’t as bad as first feared, particularly when you take away the accountancy fees, taxes, etc that come with running a PSC. Taking this one step further, market demand will dictate the rates being paid so will this result in an increase in rates offered by the end clients?

The most important thing for all PSC contractors to do is stay calm and act now. Talk to your consultant, talk to your accountant and talk to your manager. Find out where your role is likely to sit post-April and plan ahead so you don’t find yourself rushing around at the end of the month.

Don’t leave it to the last minute.

By Jason Martin, Executive Lead Consultant

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Recruitment , Public Sector , NHS , Local Government
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