Public Purse

5th May 2016

IR35: Could proposed changes actually result in lower taxes for HMRC?

As previously reported, the government are consulting into reforming IR35 for public sector workers. They wish to make public sector engagers responsible for determining the IR35 status of the their contractors. Research by ContractorCalculator has predicted these proposals will result in a £115m tax loss for HMRC and a £610m increase in costs to the government to hire the same people.

The majority of public sector contractors surveyed said if the proposals went ahead, they would either need to increase their rates or would look for IR35-friendly contracts elsewhere. A small number would look for permanent roles, which could cause problems for government projects that rely on contractors providing short term expertise. There is, therefore,  growing concern by private sector engagers of the long term implications to them of this legislation. We are seeing cases outside the public sector of engagers forcing contractors into a contractual chain with an agency in the middle. This agency will then be ultimately responsible for assessing and applying IR35 rules.

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