Dave Chaplin, CEO and founder of Contractor Calculator, outlines the steps public sector hirers and their contractors should take to ensure they are IR35 compliant as HMRC ramps up its powers and drags more self employed workers into the system
From April 2017, the government is poised to reform the intermediaries' legislation (IR35) starting with public sector engagements, believing that HMRC is losing out on £440m in tax annually from contractors who do not apply the IR35 legislation correctly.
The 2016 Autumn Statement referred to the reforms in the public sector as likely to bring in an extra £25m in 2017/2018 and £20m in 2018/2019 when applied to 26,000 contractors.
Despite HMRC saying otherwise, experts predict that a rollout to the private sector is to seek to gather an extra £415m from IR35 taxes.
The reforms will move the onus of evaluating the workers IR35 tax status from the worker’s own company to the public sector body, and they (or the agency if there is one) will then be liable for collecting taxes using real-time PAYE information (RTI) and ensuring compliance.
