Counting the cost

By Toni Hall | 31 August 2016

Imagine being told that your organisation is now responsible for, and will be held liable for, the tax affairs of the contractors you have recruited directly.

Imagine that you are now also required to pay 13.8% National Insurance Contributions for all of your agency social workers too. That’s a big new burden! What if I told you that access to agency social workers was about to get even worse because the pool of talent has shrunk even further as contractors desert the public sector to work in the private sector, where these rules will not be applied, or quit completely?

Worrying isn’t it.

But these are examples of the impact to the public sector of HMRC’s ‘Off payroll working in the public sector’ consultation – the first salvo of which ended on 18 August. This proposal will affect every single contractor who is deemed to fall within the scope of IR35. The ‘engager’ (public sector body or recruitment agency), if the proposals go ahead, will now be held liable for someone else’s tax affairs. At the moment – the contractor is liable for their own tax affairs.

The public sector, while going through a period of drastic change, is heavily reliant on a flexible workforce, and short-term expertise, where it is uneconomical to recruit them permanently.

There is a simple solution to HMRC collecting the right amount of tax – they should enforce the rules for IR35 that already exist. Liability should remain with the individual.

There are many other complications for the public sector if HMRC’s proposal is enforced – make sure your organisation is prepared.

Toni Hall is associate director, local government executive interim, at Penna Recruitment Solutions

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