Contractors working with public sector clients have been urged to proactively check their IR35 status following the introduction of new rules by HM Revenue & Customs (HMRC).
The Association of Independent Professionals and the Self Employed (IPSE) has called for all contractors to make sure they are compliant with the new rules following their official implementation on April 6th, while criticising the government for the way in which the legal change has been implemented.
With the start of the new financial year last week, public sector organisations have now become responsible for determining the IR35 status of engagements, rather than this duty falling to the contractor themselves, as was previously the case.
If the organisation deems the engagement to be within the remit IR35, then taxes must be applied to the contractor in the same manner as an employee. However, considerable uncertainty and confusion has clouded the rollout of this change, leading many public sector bodies to take a blanket approach that has resulted in many engagements being incorrectly deemed to be inside IR35.
IPSE is therefore advising all contractors to use HMRC’s online Employment Status Service (ESS) tool, released last month, to make their own IR35 determinations and show the results to their clients, in order to avoid being placed in an inaccurate tax bracket.
The organisation also hit out at the government for failing to give public sector organisations sufficient time to prepare for the IR35 change, as the resulting confusion is damaging the relationship between self-employed workers and public sector clients.
Chris Bryce, IPSE’s chief executive officer, said: “Contractors provide great value and expertise to so many public sector organisations and it has now become a very real concern that there will be a major drain of talent moving away from the public sector.
“The government, and those public sector organisations deploying blanket approaches, must be very wary of the messages they are sending.”