Public sector bodies may need to implement an emergency action plan to avoid losing vital skills warns Dave Chaplin, CEO of ContractorCalculator ahead of April’s IR35 reforms. The advice comes following HMRC’s guidance that invoices paid after 6 April 2017 for work carried out before that date will be subject to the new rules.
Any public sector body that pays its contractors one month in arrears will need to receive invoices before 6 March while those that pay their contractors on anything more than 60 day terms will need to consider settling invoices before 6 April. Any public sector body that cannot provide proof to the recruitment agency that a contractor is outside IR35 according to the new rules will result in a contractor having his or her tax and National Insurance Contributions (NICs) deducted at source.
Dave Chaplin commented: “The fallout of the new rules for public sector bodies is potentially disastrous. We have been warning public sector hirers about the impact of the new legislation for some time now so I would hope that they have been conducting due diligence and getting their ducks in a row to deal with the new reforms well before now. The reforms represent a potential car crash for all public sector bodies that hire contractors. A poll we conducted last year told us that 80 percent of contractors plan on abandoning the public sector rather than accept a contract inside IR35 so it is important that hirers work closely together with their contractors now to establish a contractor’s employment status or else risk losing them altogether.”
Contractor Calculator would point out that those public sector hirers which pay their contractors a month in arrears may well struggle to assess all their contractors in time with only weeks to go so has come up with an action plan for them to avoid a contractor skills brain drain: place limited company contractors in a Pay As You Earn (PAYE) umbrella solution temporarily whilst assessing contractors; test contractors as soon as possible – engaging a contractor via an umbrella for more than 12 weeks will mean they are eligible for certain employment rights under the Agency Workers Regulations creating additional costs.
Contractor Calculator’s solution ir35testing.co.uk is currently available and will provide free online IR35 testing instantly. The test displays the contractor’s IR35 risk along a spectrum allowing hirers to make a fully informed decision regarding a contractor’s status and minimising any risk; once each contract has been IR35 tested hirers will know which contractors have passed and who can return to trading via their limited company on the same terms as before and can negotiate an outside-IR35 contract for those who fail.
Dave Chaplin added: “The timing of these reforms is causing utter chaos and already threatening an exodus of talent. This will have a significant impact on an already stretched public sector. Government projects rely heavily on contractor expertise and the whole point of hiring contractors via personal service companies (PSCs) is the public sector wants contractors, not employees, for short-term expertise on tap. The proposed reforms are already starting to potentially cause irreconcilable damage for all involved but we are where we are, so I would advise any ill-prepared public sector body to heed our advice and carry out our action plan without delay.”