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‘Reasonable care’ needed for IR35

‘Reasonable care’ needed for IR35

A late addition to the recently released Finance Bill from the UK government has added in a clause stating that ‘reasonable care’ must be taken by public sector bodies when determining a contractor’s tax status.

From April 2017, end clients in the public sector will be responsible for determining the IR35 status of contractors who supply services through personal service companies.

The ramifications from this move have been serious, as it has been widely predicted that rather than analysing said status, public sector organisations would simplify things by placing contractors on the normal payroll.

Contractors would, in that scenario, lose many of the benefits of being a contractor, and widespread walkouts were predicted – and in some cases have come to fruition.

However this clause in the bill discourages snap decisions by public sector organisations.

Furthermore, as part of the bill, contractors now have a legal duty to tell recruiters if they supply services through a PSC, a limited liability partnership or through another individual.

Following many months of negotiations with the UK government around off-payroll changes in the public sector, the Association of Professional Staffing Companies (ASPCO) has welcomed the recent developments.

“Firms working with professionals in the public sector aren’t tax experts,” said Tania Bowers, General Counsel at APSCo. “They also have no visibility of how a role is undertaken on the client site, or indeed how the contractor runs his or her PSC or LLP and so are ill-equipped to determine tax status. The ‘reasonable care’ provision, which was dropped into the legislation at the eleventh hour, puts the onus back onto the client.”

“We also welcome amendments since the draft schedule which place an obligation on the contractor to prove their intermediary meets the conditions for Off Payroll to apply, further moving determination away from the recruitment profession,” she added. “While recruiters working with public sector organisations will, of course, have to be vigilant and compliant when placing PSC contractors, by questioning clients’ decisions, for example, it is a relief that the sector has not been lumbered with the administrative and financial responsibility of determining if engagement is inside or outside of Off Payroll.”