The IR35 saga in the public sector rumbles on this week, as one of the UK’s largest public sector organisations, the NHS, has deemed its entire personal service company (PSC) workforce inside IR35.
The move is indicative of what many feared would happen were the legislative reforms around IR35 in the public sector put through. With confirmation from the government now given, some will see this blanket approach as one of many similar moves set to come from public sector organisations.
But it might not be quite that simple. The NHS’ move will have major repercussions if recent research is to be believed.
A survey conducted by status advisory firm Qdos found that 85% of contractors working in the public sector would look to move into other areas if found to be inside IR35, and thus missing out on many of the benefits contracting brings.
If such predictions come to fruition, the NHS will be left with a sizable gap in its workforce that it has made no noises about how it might try to fill.
And that might not be it.
The government last week added a clause to the finance bill, stating that ‘reasonable care’ must be taken by public sector organisations when determining the IR35 status of contractors it employs.
The addition of the reasonable care clause was ostensibly added to avoid such lazy, generalised rulings around IR35. It seems this has been either blatantly ignored by the NHS, or the people making the decision were not aware of the clause.
Either way, whether HMRC penalises the NHS for not showing reasonable care and falling foul of the finance bill could be vital. A soft touch here, and many public sector organisations could make similarly broad decisions about their respective PSC workers, without fear of major consequence.
If the NHS is made an example of however, more public sector organisations will be inclined to go through the IR35 determination process properly, thus leaving the option for many contractors to continue working in the public sector.
What the HMRC will do however remains to be seen.