Ahead of the imminent changes to IR35 in the public sector, one taxation body has stressed the need for clarification about what workers can expect once the reforms kick in.
The Association of Taxation Technicians (ATT) has formally expressed its concerns about how organisations in the public sector will manage the status decisions for its workers around IR35.
One fear is that workers like contractors may end up paying more tax because of the decision the public sector organisation makes regarding whether they are contractors or full employees.
Furthermore, there is no clear way to appeal the decision of the public sector organisation they work for.
This uncertainty has already seen some walkouts by contractors working in the public sector, which have faced much criticism from various parties since announced by the government.
“We urgently need clarity from the government on the new rules in respect of those workers contracted to work for a public body client through an intermediary,” said Michael Steed, co-chair of ATT’s Technical Steering Group “Shifting the liability to assess whether an engagement is akin to employment or self-employment to the public sector body may lead to some decisions that workers find arbitrary, inaccurate and unfair. It is disconcerting at this stage that there has been little debate or guidance on how such a worker can contest or appeal decisions of the public sector body.”
If a worker is declared a full-time employee for practicality’s sake by the public sector organisation, despite having worked previously worked as a contractor, they will have to pay National Insurance taxes and PAYE.
The ATT has also voiced its concerns regarding which organisation should pay secondary Class 1 National Insurance, which has hitherto been paid by employers. The documentation around the changes lacks clarity on this point.
Many workers will also be concerned about accessing tax credits, and what the best way to treat dividend payments will be once the changes kick in.
Steed added: “We are concerned that workers may not have the clarity on their tax responsibilities and rights before the changes go ahead in the public sector in April 2017 and this will set a worrying precedent if the changes are rolled out to the private sector in the same style in the future.”
Should you want some peace of mind, we offer a full contract review amongst other services to help you prepare for IR35. We’ll give a pass or fail based on the current contract you hold, along with comprehensive comments on how to improve any problem areas.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news and contractor guides.