The government had previously confirmed that from 6 April 2017 contractors who work for public sector bodies via certain intermediaries, such as personal service companies (PSCs), some partnerships and other corporate entities, will see income tax and national insurance taken by these public bodies at source before paying their fees.

The measure moves responsibility for deciding if the off-payroll rules apply from an individual worker to the public sector body. The 5% allowance to cover the cost of administration will also be removed.

The move is expected to raise £440m for the Treasury by 2020.

There had been fears the policy could have been extended to the private sector, but according to PwC, this could still happen next year. John Harding, tax partner at PwC, said: ‘Given the Chancellor's repeated focus on fairness in the tax system, it would not be a surprise if in the next Budget the Chancellor extends these new rules to contractors in the Private Sector or perhaps introduces even more radical changes in the taxation of work.

‘As HMRC tightens the rules around the tax treatment of constantly evolving employment arrangements, it will be important to balance safeguards for employees with the flexibility in employment arrangements that many desire.’

PwC predicted that those affected would shift their focus from the public to private sector, or increase their charges to the public sector. As Harding says: ‘The change to these rules will hit a wide range of contractors including locums, nurses, IT consultants and interim managers working in the public sector. 

‘All those impacted could see their take home pay cut significantly. Given the sums at stake and the fact that these changes have not been extended to the private sector, contractors will increasingly look to either increase their rates to compensate for these changes or simply move to work in the private sector.’