A significant 42% of central bodies and nearly a third (30%) of sites reported that the rule changes had affected their ability to fill vacancies although wider fears of a hike in rates was not as bad as expected with 63% of central bodies and 78% of sites experiencing no change to contractor rates.

The research also found that some public authorities have experienced ongoing administrative costs in order to continue to comply with the reform. However, some public authorities felt that these costs would decrease over time and many had experienced no additional costs beyond the initial set-up costs.

However, a considerable proportion of public authorities did experience early difficulties in complying with the reform, largely related to gaining familiarisation with HMRC’s check employment status for tax (CEST) service and resolving disputes with workers and agencies.

The majority of public authorities were reported to be making assessments on a case-by-case basis (91% of central bodies and 87% of sites).  The research did find that some public authorities have found it harder to fill off-payroll vacancies since the reform was introduced (32% of central bodies and 22% of sites), while some reported off-payroll worker rates had increased since April 2017 (28% of central bodies and 20% of sites). However, this was found in areas where skills were already known to be scarce.

As regards the CEST service, designed to give a clear answer as to whether a user is employed or self-employed, HMRC said its analysis shows this happens in 85% of cases. For the remainder, HMRC provides detailed guidance and the specialist employment status helpline. The CEST service has been used over 750,000 times. HMRC’s latest figures show that it gives a self-employed outcome around 60% of the time, and employed around 40% (based on February 2018 data).

To address concerns about the potential impact of the reforms on UK labour market flexibility, and the administrative burdens on clients and agencies, HMRC commissioned independent research from IFF Research and Frontier Economics. The research comprised of a quantitative survey of 117 central bodies, and 15 (covering 4,095 sites) and 100 individual sites in the public sector, all of which had recent engagement with off-payroll workers. There were qualitative follow-up interviews with 30 respondents whose responses indicated they had been affected by the reform.

The private sector IR35 consultation will close on 10 August 2018.

Open consultation Off-payroll working in the private sector

Report by Pat Sweet, Sara White