Pragmatism: the choice facing public sector contractors
I grew up with an interesting mix of public sector and
private sector parents - one a teacher all her working life, the other a
printer, who spent most of his life in the private sector before joining the
HMSO, only for it to become the Stationery Office and with it a swing back into
the private sector.
Inefficient, sluggish and poorly managed were terms
frequently used to describe the public sector in my growing up and, from their
anecdotes, I can’t disagree with their assessments based on their personal
But for all that, my Mum remained an ardent supporter of the
public sector and my Dad an ardent critic from a practical perspective. Ideologically
they were both supporters.
And the essence of their difference of opinion is one facing
many public sector contractors this spring. No doubt many are big fans of the
public sector, but pragmatically, perhaps not so much.
On the 6th of April 2017, the recruitment industry faced a
change to IR35 for contractors in the public sector.
We’ve been moved from a position where the contractor makes
an assessment of his or her IR35 status to a position where the end client has
to make that assessment.
Now that in itself is a plan with many deficiencies.
For sure not all contractors are tax experts, but most
contractors who work through their own limited companies will at least have a
friendly accountant who helps them with their tax affairs on a month to month
or year to year basis anyway. Usually they are at least reasonably well placed
to get an explanation of what it means, even if they themselves are not
immediately familiar with it.
This is not the case for our public sector hiring managers
who are – for example - IT managers, ward sisters and deputy heads of teaching
staff, and it was with very little lead-time that the
first publicly available guidance became available from HMRC. Not enough
time for busy workers to familiarise themselves with what can be a complex
So what the recruitment industry is facing is hundreds of
thousands of hiring managers in the public sector who aren’t tax experts, but
who are being asked to make tax assessments, when the guidance was only
published two months before the change took effect.
I think that may be outside even the bounds of the wide new
vistas of training that the Apprenticeship
Levy will be supposedly opening up: another change that came in on the same
So what is clear is that many of our clients have been
But where does this leave the contractors who will now have
their tax status foisted upon them by someone ill trained - or even not trained
at all - to make that choice?
In a similarly unsatisfactory position.
In the first instance, they have no right of appeal against
a decision about their tax status which in many cases will be made by someone
not qualified to make it. Secondarily, if they are deemed inside of IR35, they
will be taxed at source so the payment they receive for their services will be
net of PAYE and NICs.
Which brings me back to ideology vs. pragmatism. Some
contractors are wedded to the public sector: it suits their ideology – they
want it to work. Some have limited alternative options because most of the jobs
in their chosen profession are in the public sector, so even if they wanted to
jump ship, they have limited opportunities to do so.
But if your skill sector is not public sector dependent, then
since the 6th of April, the private sector has become simply a less
administratively burdensome place to work, leaving you with more control over both
your business and your finances. Difficult choice? I don’t think so.
For sure this might be the last hurrah. We might be facing
the end of IR35 as we have known it. It’s hard to imagine that a Government
strapped for cash won’t seek to roll out the same legislation into the private
sector in a year’s time; in two year’s time. But for now, this change doesn’t
affect the private sector. And for now, the private sector is probably looking
like a more appealing option for many, many contractors.
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