ir35 reform and its effects on the public sector in 2017

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The public sector is feeling the effects of IR35 reform

Last updated on Thursday, September 14, 2017

Written by Alex Cadman

Since the off-payroll rules for intermediaries in the public sector came into effect on 6 April 2017, there seems to have been a mass exodus of contractors and temporary workers from the public sector. IT and technology have suffered in particular, with government projects reportedly facing delays.

Many contractors with limited companies have decided to abandon the public sector altogether, as they no longer have the power to determine their own IR35 status.

IT in the public sector is among the areas that have suffered the most, with more than three-quarters of government departments losing IT contractors due to IR35 changes.

This apparent exodus is proving troublesome to the progress of key government projects, as abandoned posts has resulted in delays. Replacing highly-skilled workers is no easy feat, either.

Whereby public sector clients are assessing their contractors as inside IR35, many contractors, as a result, are demanding higher rates of pay to make up for increases in tax and National Insurance payments. If this isn’t successful, many decide to leave the public sector altogether for the private sector where the same rules do not apply.

A survey of 1,500 contractors by Contractor Calculator found that:

  • 37% left the public sector after the reforms came into place
  • 61% of those who left the public sector public sector did so because they refused to work under the new rules
  • 46% said they would only work in the public sector under IR35 if the government essentially paid the extra tax and deductions they would owe

HMRC has discounted the survey findings, stating that there’s been no evidence to illustrate an exodus of contractors from the public sector, and that there are no delays to IT projects as a result of the reforms – despite some surveys, research and testimonials stating otherwise.

We have a quick guide on what you can do in the case that you are a public sector contractor, with your own limited company, who has been caught by IR35.

One option, if you wish to continue working in the public sector, is to sign up to an umbrella company. As a client of an umbrella company, you would effectively be on their payroll, and the umbrella would make the relevant tax payments and deductions on your behalf. You wouldn’t have to worry about IR35 assessments or paying tax as this is all handled for you.

Churchill Knight Umbrella is a quick and easy way to get paid. As an employee of Churchill Knight Umbrella you will benefit from:

  • Quick set up
  • No joining or leaving fees
  • Statutory benefits, including sick pay, maternity/paternity pay and annual leave
  • Churchill Knight 360 – the ability to switch between our umbrella and limited company service for free
  • Churchill Knight Rewards – access to our employee rewards scheme whereby you can save hundreds of pounds on your daily purchases
  • Less than 15 minutes of admin per week
  • Full insurance cover - £10m Employers’ Liability, £10m Public Liability and £5m Professional Indemnity
  • Your own dedicated point of contact

Contact us
for more information on the best payroll option for you and your circumstances. We’ve helped hundreds of public sector contractors decide on their next move following IR35 changes – contact us on 01707 871622.

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