Could IR35 rules governing how contractors are taxed be extended to cover the private sector as well?
Signs point to yes. In a recent interview with the Financial Times, the financial secretary to the Treasury, Mel Stride, said the department was considering reforms to tackle “the issue of fairness between the public and private sector,” which would make organisations responsible for shortfalls if workers are under-taxed.
IR35 was introduced in the public sector in April 2017. It changes the tax system for self-employed – or PSC – workers, increasing tax for some contractors. Geoff Fawcett, a director at Hays, says blanket implementation has led to tough decisions around retaining vital contractors.
“The changes are likely to create a level playing field, with the private sector no longer offering an alternative,” he adds.
The key is to be prepared, as procurement teams may find themselves responsible for deciding whether contractors fall under the new rules.
Fawcett offers the following tips:
• Avoid delays
Organisations that implement the rules and test on an assignment-by-assignment basis will continue to be able to access talent.
• Undertake a risk assessment
Carry out an audit of the interim workforce – establish if they are treated as employees or provide services as self-employed.
• Think long term
Consider how you will assess each assignment and maintain control over contractor use. If you rely on contingent workers, a managed service programme (MSP) may be beneficial.