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IR35 textbooks and legislation aside: we’re all still guessing about the public sector

Posted by: Patrick Gribben | 03.02.17

Intouch Accounting

What the team at Intouch thinks will happen next

It’s one thing to know the ins and outs of the legislation, and another to anticipate how everything will play out in practice over the coming months. Everyone, including Intouch, has a view on this and it does of course depend upon the attitude to risk of the public sector body. For example, TfL’s approach of “no more PSCs, thank you” compared to the MoD’s “let’s assess everyone fully then decide”. Outcomes will also be influenced by the degree of reliance upon the technical expertise involved and ability to substitute or replace the worker.


Unhelpful influences and how they will affect implementation of the legislative changes

Intouch cannot escape the conclusion that issues of morality, political correctness and “following the line of least resistance” will lead to many workers being shoe-horned into deemed employment without getting the associated and deserved employment rights.


For them, and any other vulnerable workers, many will and should return to agency payroll or permanent positions, where take home pay is comparable and employment rights follow.


However, for the vast majority of independent knowledge workers in the public sector, the unhelpful influences remain as follows:


  • Agency fee payers or end hirers may just avoid risk and conclude (based on varying degrees of evidence gathering or not) that the arrangements are within IR35. They will apply tax at source, the end hirer will be happy, and a victim will be found to bear the employment taxes.
  • Agencies will want to avoid PSC risk and “encourage” their workers to return to Umbrellas. Umbrellas will continue to pay rebates, rewards and doughnuts for introductions made by agencies and the losers of margin will be the contractor.
  • Competition between agencies will intensify as they all seek a “Hail Mary” solution that enables them to offer something better to their workers than the offering of a competitor. This will prompt the emergence of new models.We are seeing a new breed of intermediary arise which can be “inserted” into the supply chain between the current fee payer (agency) and the worker’s PSC. This is one form of a new body built to absorb risk and not liked by HMRC. Parties are already referring to these entities as “redundant intermediaries”.
  • Also, we recommend extreme caution if tempted by other so-called “compliant” models. The stigma of failed EBTs and offshore arrangements all fall foul of rigorous anti-abuse and tax avoidance regulations.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.