IR35: The story so far

12th April 2017

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In the build-up to the new proposed changes to IR35 legislation for the public sector being implemented, there was of course a sense of unease and cynicism within the public sector’s PCS community. With IR35 decisions now out of contractors hands and into their employers or engagers, many saw no positive long term outcomes from the new changes and were fearful over their status as a PCS.

With it now nearly a whole week since the changes were made official in the public sector, we’ve already seen IR35 make an immediate impact, particularly with the recent news that the NHS have confirmed its entire workforce as inside IR35.

Here’s the lowdown on what’s happened so far regarding IR35, before, and after these changes…

A blanket approach, but one size does not fit all

In most contractors cases, they are there because of their unique skill set and they are likely to have quite unique circumstances surrounding their employment situation with a public service.

With this in mind and the new changes, there is a need for mass assessment but on a bespoke and personal level. Despite HRMC aiding the transition to the new changes with the creation of an online IR35 calculator, some public sectors have stuggled to cope with this assessment demand  due to the lack of resource and the expected high admin costs. An easy and cost effective solution has been to tar all PCS workers with the same brush and place all contract workers within IR35.

We’ve seen this occur as mentioned with the NHS placing all their PCS workers within IR35, with negative repercussions expected as a result.

Unfair decisions

Following on from this blanket approach, this disregard for individual assessment has naturally led to a number of contractors feel as if they have been treated unfairly.

In the run up to the new IR35 changes, we have so far not seen a great level of consistency with companies going through the process fairly and with as required ‘reasonable care’. However, with some companies seeing all their contractors placed inside IR35, this has not only led to frustration and annoyance, but also confusion. It still seems that further clarity is needed over the new IR35 changes.

Read our previous post here on how to respond to unfair IR35 decisions from Qdos Contractor.

Public to Private

Given these unfair decisions, and the general negativity towards the new IR35 changes, public sector contractors have been given two choices in how to respond to the changes; suck it up and see or move to the private sector where IR35 decisions are put back into their control.

The changes made by the NHS have impacted contract workers for the worse with NHS contract workers expected to be worse off financially as a result of the blanket decision. This has caused concern for the lack of locums available to NHS trusts as a result of the influx of these contract workers moving to the private sector on account of their drop in pay thanks to IR35.

We’ve already heard of the IT contractors responsible for HMRC’s IR35 tool and their plans to move into the private sector as a result of the new IR35 for the public sector.

Public services suffer

Could we see more public sector organisations lose key contract workers with niche skill sets to the private sector? Will something have to budge to achieve a fine balance? It’s already been reported that contractors within the NHS wouldn’t be able to cover their expected losses with pay rises, so will there be a happy medium to stop the mass exodus from public to private?

The government are already urging the need to not panic, but with healthcare and IT already affected for the worse, will other public services suffer?

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