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Accountancy

Attempting to Influence Public Sector IR35 Decisions

If you're working in the Public sector, the end hirer is responsible for deciding if your contract falls inside or outside IR35. Unlike the Private Sector, where there is an exemption for small companies, all public-sector clients are included ...

Where your end client is a public-sector body, they will have been responsible for determining the IR35 status of contractors since April 2017, which means you can expect them to have an established process for dealing with IR35. Even so, if you know you're genuinely outside IR35, you'll want to do everything you can to help them come to the correct conclusion and satisfy yourself that the process is suitable and that decisions are being taken fairly.

How to influence an IR35 determination

Assuming you are genuinely outside IR35, the best way to influence the decision is to provide as much accurate information as you can to your client during their assessment process. This will include evidence of your working practices, and might go as far as obtaining a professional assessment of your own.

If your client uses CEST

The Government's Check Employment Status for Tax (CEST) tool has faced much criticism, but it is being used by Public Sector bodies, which means you have to deal with it at some point. We advise that use of CEST be combined with assessment by independent experts, and if this is not the case you should feel free to voice your concerns to your client, particularly if the result doesn't match other assessments of your status.

Our Status Tool

This asks a few more questions than that of HMRC and is based on previous case law history. The short questionnaire will produce a detailed report explaining where your case is strong or weak, unlike HMRC’s tool that provides no insight into the result.

A strong inside or outside result using this tool, maybe enough to persuade your public-sector client, or to help you decide whether to accept it. If you are not satisfied there is more you can do.

Engage your own independent expert

A full Contract and status review can be carried out with a specialist such as our partner Bauer & Cottrell. A review will involve more than an online tool and will allow an advisor to talk to you, your agency and perhaps end client about both contract terms and working practices.  The outcome of such a review, based on evidence pooled from many sources can prove powerful.

If it doesn't go your way

Despite your best efforts to “persuade” your client that you have evidence of being “outside” IR35, the decision is for them to make and they may not agree to a re-evaluation. At this stage you and your agency have a choice.

You can choose not to accept the decision and leave your current contract. Many have done this and sought alternative work to safeguard their earnings.

You and your agency can choose to disregard the assessment and continue to pay your Limited company without deducting PAYE and NIC from the payments. Ultimately this is a risk for your agency as they are responsible in the legislation for ensuring the correct taxes are deducted based on the opinion of the end client. You may be able to use all the techniques described above to influence your agency, but they will ultimately decide their own robust system with regard to this and their own attitude to risk.

You can accept the determination and consider how to operate “inside IR35”. You will at this stage be acknowledging that you will be taking home less money, either through your Limited company or by moving to an Umbrella model. We explain here why an Umbrella model is our best advice. If you do decided to switch to a umbrella company employment you might consider asking for a rate increase to ensure you protect your income.

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