An online petition has been launched, urging the Government to scrap the April 2017 IR35 changes for contractors working in the public sector.
As things stand, from April 2017 public sector clients will be given the responsibility of assessing the employment status of any contractors working for them.
Clients will be tasked with determining whether or not the contracts between contractors and the public sector body fall inside or outside the IR35 legislation.
Contractors deemed to be ‘inside IR35’ will have PAYE (income tax) and National Insurance deducted from their gross pay at source (via the agency if there is one in the chain).
Unsurprisingly, the financial cost for those caught is significant – even after taking into account the April 2016 dividend tax hike, which reduced the tax benefits of incorporation.
This change was confirmed in Section 4.11 of the 2016 Autumn Statement.
HMRC released draft legislation on 5th December 2016 and a technical note which provides further details on how IR35 will be operated in the public sector. And, to the surprise of many, the document stated that it will be the client, not the recruitment agency, which will responsible for determining IR35 status.
Not only is this of great concern to contractors working for public sector bodies, but limited company contractors, in general, will all be aware that the private sector could be targeted next if this initial piece of legislation is deemed to have been a success.
A petition against the off-payroll changes has been launched – ‘Scrap IR35 legislation reform proposals for public sector off-payroll workers.’
The petition’s creator, Gareth P Rowell, says that the new rules “will severely reduce the income of such individuals but confer none of the rights & benefits of a staff employee.”
This is true, of course; limited company workers caught by the rule change will have to bear all the costs of running a company, insuring themselves, and paying for various ‘perks’ enjoyed by traditional employees. But they will have to pay the same rates of tax as employees.
Take a look at our popular post, the perks contractors have to pay for, which employees take for granted.
Over 15,000 individuals have already signed the IR35 petition. You can add your signature here.
What happens next?
Once a petition has collected 10,000 signatures, it will receive a response from the Government… and if 100,000 people sign a petition, it will be ‘considered for debate’ in Parliament.
In September 2015, a petition against punitive dividend tax changes was launched – it received 58,293 signatures, which merited a three paragraph response from the Government. The dividend tax hike went ahead, unchanged, in April 2016.
Hopefully, this latest petition will attract more support.