NHS IT agency foresees PSCs moving to brollies

Contractors who supply the NHS through limited companies will likely move to umbrella companies before April’s IR35 reform comes into force, a health service IT recruiter predicts.

Contractors’ next best alternative is to leave the public sector or the NHS for the private sector instead, says Don Tomlinson, managing director of NHS IT staffing firm max20.

Tomlinson sounded aware that contractors who don’t act before April will have a third option -- stay as a limited company and accept the IR35 decision of the end-clients they engage.

But because public bodies are “far more risk-averse than recruitment agencies,” he says “many” PSCs will head off the more cautious decision of ‘inside IR35’ by joining a brolly.

Accountancy firm Orange Genie says the numbers favour such a move. “You’ll be £83 worse off [per month, if declared ‘inside IR35’] than even if you were with an umbrella company,” it said, factoring in VAT at 16.5% (FRS) and the removal of the 5% expenses allowance.

“So for once,” the firm’s Dan Moss added during a webinar, “the umbrella company take-home [pay] is outweighing a PSC [or] limited company in [income] if you’re inside IR35.”

Almost regardless of how they choose to operate, Tomlinson says PSC contractors supplying IT services to the NHS will see their pay and arrangements ‘change beyond all recognition.’

He was referring not just to the IR35 change from April -- preceded by an order to stop paying its limited company workers, but to the IT agency pay cap, which he outlines for ContractorUK today amid confusion over how it operates.