The Association of Taxation Technicians (ATT) is calling for more information about how public sector workers can appeal against a change in their employment status following the introduction of new rules around IR35 in April, and is warning there is a risk some will lose income as a result of ‘arbitrary’ decisions
The ATT says it has concerns about how the public sector will manage new rules requiring them to make IR35 employment status decisions from April 2017. A possible outcome is that a worker may pay more tax because the NHS or another public sector organisation considers them from April to be deemed employees rather than genuine contractors, without an apparent way for the worker to appeal the public sector body’s decision.
Michael Steed, co-chair of ATT’s technical steering group, said: ‘We urgently need clarity from the government on the new rules in respect of those workers contracted to work for a public body client through an intermediary.
‘Shifting the liability to assess whether an engagement is akin to employment or self-employment to the public sector body may lead to some decisions that workers find arbitrary, inaccurate and unfair. It is disconcerting at this stage that there has been little debate or guidance on how such a worker can contest or appeal decisions of the public sector body.’
Up to April 2017, if IR35 applies, then the intermediary has to operate PAYE and NICs at the end of the tax year on any income it has received that has not already been paid out to the worker as salary or wages during the tax year.
Under changes in April, the government wants public sector organisations to determine the IR35 status of the engagement. If the agency or public sector organisation falls within scope, they then have to deduct taxes under IR35 when paying the worker’s company in a similar way as they would for their employees.
However, ATT argues that a worker may feel they should not be treated as an employee in such circumstances, but under the draft legislation published by the government the association says that worker appears to have no apparent recourse to appeal the public sector body’s decision.
The ATT is also concerned about the lack of clarity on which organisation should be paying secondary Class 1 National Insurance, paid by employers, because of the changes. Some workers will also have concerns about how the changes will affect their access to tax credits and how they should treat dividend payments.
Steed said: ‘We are concerned that workers may not have the clarity on their tax responsibilities and rights before the changes go ahead in the public sector in April 2017 and this will set a worrying precedent if the changes are rolled out to the private sector in the same style in the future.’
