Autumn Budget 2017 – Consultation Announced into IR35 Private Sector Roll-out
Posted on 23rd November 2017 at 18:15
As many of you will know, April 2017 saw the introduction of IR35 reforms in the Public Sector. During the Autumn Budget, the Chancellor announced a consultation to seek to expand those reforms into the Private Sector.
What are the reforms?
Pre-April 2017, the determination of IR35 status had been the contractor’s responsibility. This essentially meant that the contractor had the power and ability to review their contract and working practices and decide whether they were inside or outside of IR35 and manage their tax accordingly.
From April 2017, changes introduced means that contractors working in the Public Sector lose this power – and the responsibility for the determination of IR35 status is instead in the hands of their end client. If deemed to be inside IR35, the end client (or agency if one is involved) will need to deduct PAYE and NI accordingly.
What are the reforms?
Pre-April 2017, the determination of IR35 status had been the contractor’s responsibility. This essentially meant that the contractor had the power and ability to review their contract and working practices and decide whether they were inside or outside of IR35 and manage their tax accordingly.
From April 2017, changes introduced means that contractors working in the Public Sector lose this power – and the responsibility for the determination of IR35 status is instead in the hands of their end client. If deemed to be inside IR35, the end client (or agency if one is involved) will need to deduct PAYE and NI accordingly.
What has been the impact?
Due to risk adversity within the Public Sector, for fear of falling foul of the legislation and no doubt to be seen to be doing the “right thing”, blanket assessments were made, forcing large numbers of locums and contractors out of the NHS and other public bodies.
This has reportedly led to a decline in front-line public services including the NHS, robbing them of vital skilled workers. This is leading not only to a lack of labour in our hospitals and key public bodies, but projects for much needed modernisation and improvement are being cancelled or put on hold indefinitely.
Some recent statistics from a survey of 450 healthcare locums show:
25% of the respondents have left the NHS following the reforms
– ContractorCalculator 2017
76% of respondents did not agree with the IR35 assessment
– ContractorCalculator 2017
87% of respondents say the reforms are already impeding patient care
– ContractorCalculator 2017
So, what happens now?
Despite the above, the Government have announced a consultation into rolling-out the same reforms into the Public Sector.
As confirmed in the Budget Document:
“3.7 Off-payroll working in the private sector – The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017. Early indications are that public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company. It is right that the government take account of the needs of businesses and individuals who would implement any change. Therefore the government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published in 2018.”
What does this mean for me?
If the reforms are rolled-out into the private sector, you will lose the power to determine your IR35 status.
Scary thought – but remember, the private sector traditionally has a more greater appetite to risk and will also have a better handle on the impact of these changes on not only their business but the wider economy. I believe that they will take a more pragmatic view.
Is there anything I can do now?
Yes, you can:-
1. Review your contract in detail – and remember that we provide a full IR35 review service.
2. Open up the communication channels with your agency and end-client ready for any discussions and negotiations.
3. Stay up-to-date by following our blog and follow us on social media.
We also recommend that you follow or connect with Dave Chaplin, ContractorCalculator CEO on LinkedIn. He is extensively involved in lobbying against the reforms and writes about this on a near full-time basis.
Written by:
Nicola J O'Sullivan -
Effective Accounting
Founder | Xero Champion | IR35 Expert
Tagged as: IR35, Legislation
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