Since being introduced in April 2000, it’s undeniable that IR35 has been controversial. Despite numerous case studies having been made about the contractor fall-out from the IR35 reform, it’s often overlooked as to how you can help yourself, as a contractor, while continuing to work in the public sector.
Working for yourself generally comes with a lot of responsibility; being aware of your legal duties towards your client, understanding the implications of your advice and designs and ensuring you’re paying the right taxes are all parts of being self-employed. These responsibilities are tenfold when working in the public sector, especially when clients are national corporations like the NHS and BBC – every mistake is public information to be scrutinised. Understanding yet another piece of complicated legislation seems laborious, but IR35 is becoming increasingly prevalent in the mainstream media, so it’s more important than ever to stay compliant.
We’ve written up some advisory rules to help you navigate working in the public sector as a contractor.
How was IR35 launched in the public sector?
You can read all about what IR35 is here, but we’ll assume you know the basics for the sake of being succinct in this particular guide.
Back in 2012, rules were introduced that affected contractors who provided services to the public sector through their limited companies.
The rules dictated that if the contract with the end client was equal to or longer than six months, and the day rate was equal to or greater than £200, the contractor has 20 days from the issue or renewal of the contract to present evidence of their IR35 status. Failure to present the evidence can lead to the contract being terminated and details passed on to HMRC.
However, in the 2016 Autumn Statement, the Chancellor announced that the public sector was to undergo a massive revamp in 2017.
From the 6th April 2017, ‘off-payroll’ rules meant that the IR35 status of a contractor was no longer determined by themselves, but by the public sector organisation – or end client, in other words.
The heavily criticised CEST tool was introduced that same year, which has been directly blamed for mass inside-IR35 determinations for contractors that previously were always found to be outside. BBC chiefs spoke on this topic extensively at the beginning of this year, and have explicitly blamed IR35 for their failing relationships with contractors that have historically made huge contributions to producing BBC work.
What rules should public sector contractors follow to stay inside-IR35?
If you’re unsure as to what constitutes a public sector worker, you can use this guide to work out where you stand. Otherwise, you should observe the following rules as loose advice only – always get a professional opinion if you’re concerned about your IR35 status.
Work your way
As a freelancer, your client shouldn't tell you how to work.
This is easier to implement in the private sector, where businesses are smaller and more flexible in the way they work. No matter if you’re a graphic designer supplying wall vinyl designs or a locum heart surgeon, the NHS shouldn’t have the same control over you and your work as they do their own employees. You should instead have a set of deliverables and be left to complete the work using your own tools, in your own way, in your own time.
This is impractical in terms of appointments and adhering to certain legal aspects of working on behalf of the NHS, but the rule of control should be observed as much as practically possible.
Christa Ackroyd is a good example of how not observing this rule can lead to an IR35 investigation.
Win and accept work through your company
Make sure your contract clearly specifies that the client or agency is hiring your company, not you as a person. Your company should be the provider of your services at all times – this is extremely important to get right.
This is one of the main arguments being used against Eamonn Holmes in his IR35 case.
Do only the job agreed
While it may seem stingy to turn down small tasks that the client requests in addition to your main contracted job, this behaviour could actually get you into IR35-related trouble. Any work outside the scope of your contract could be interpreted as client control – i.e. that you’re actually employed by them.
This is a common problem in the public sector. Many younger freelancers want to make a name for themselves when working for national clients like the BBC and feel like they can’t turn any work down. Remember that your client should not pressure you, or make you feel at risk of losing their work, if you decline to do anything outside of what was agreed in your contract.
Don’t accept a safety net
A big drawback to
Make no commitments
If the client is contractually obliged to provide a set amount of work per week and you’re obliged to do that work for a set amount of hours, that’s very much an employer-employee relationship.
Locum staff in the NHS are most likely to come under fire for this – don’t be pressured into committing to a set amount of hours per week, no matter how short-staffed your ward is.