IR35 Costs: Public sector employers say changes to tax system will cost them.

A survey by the Recruitment and Employment Confederation (REC) has revealed the belief among public sector employers that IR35 changes would cost them money and talent. Furthermore, these employers are particularly concerned that the rule changes will inhibit their ability to attract the talented individuals they need to effectively run local authorities and NHS trusts.

The survey of 95 public sector HR managers was conducted as part of the REC’s submission to the HMRC consultation on ‘Off payroll working in the public sector’. Asked about their ability to assess if a contractor falls within the scope of IR35, the tax regulation which applies to interim managers working via personal service companies, two thirds (65.3 per cent) said they were very or somewhat confident in making those judgments. Only one in eight (12.6 per cent) said they felt the rules were unclear.

Seven out of ten (69.5 per cent) public sector employers expressed fears that the government’s changes would have a negative impact on councils, hospitals and schools, by increasing their wage bill or damaging their ability to attract and afford the senior contractors and interims they need to manage local public services.

A recent report by HMRC’s own research team into these proposed changes to intermediaries’ legislation found that employers view interims as “central to the success of their businesses” and that the changes are viewed as potentially “costly, burdensome and constraining”.

Kevin Green, chief executive of REC said:

At a time when the public sector is struggling to recruit talent because of a declining pool of people with the right skills, this could really spell trouble for the effective running of the NHS and other vital public services. The public sector needs to be able to attract the brightest and the best, yet our own government is creating unnecessary barriers for beleaguered HR teams who need to bring in fresh talent and smart thinking during these difficult times for public spending. There is no doubt that HMRC should be enforcing the rules better.

In light of this latest data and the wealth of supporting evidence out there, we believe that the government should conduct a wholesale review of IR35 and at the very least, delay the implementation of this proposal – rather than rushing it in for April 2017.

Published on: 16 August 2016 - By: The Global Recruiter