With PAYE and NIC deductions, contractors that fall within IR35 (and it looks likely that a majority will fall within IR35 rules) stand to lose a large chunk of their income. The choices for contractors are simple – take a lower income, leave the public sector and compete in a highly competitive private sector, or increase their rates to offset the losses.
It is difficult to forecast what will happen and how the workers will react it will be impacted by the sector they are operating in; you need to look at competition for roles, shortages, opportunities in the private sector and so on. With the potential threat by HMRC for back tax investigations for workers who had previously worked outside IR35 but are now assessed as inside IR35, many are no doubt considering making alternative arrangements sooner rather than later to mitigate potential back tax in the future.
How difficult will it be for you to find workers for assignments now? Research by IPSE suggests that 54% of PSC contractors may simply terminate their public sector contracts. Other research indicates higher proportions will move and there are already reports of whole IT PSC teams leaving their public sector work for the private sector.
Act now – assess the risk and talk to your contractors to gauge their attitudes and likely decision.
Our IR35 experts would be happy to talk to you on a call or visit your office for a chat over a cup of coffee. For any queries regarding IR35, please feel free to contact:
Pom Chakravarti: Call 07870 678 557 or email firstname.lastname@example.org.
Kunal Shah: Call 0758 4651087 or email email@example.com.