Public bodies unite to try to shelve IR35 changes

A body that represents local government’s senior leaders is calling for April’s IR35 changes in the public sector to be shelved for six months.

The Society of Local Authority Chief Executives (SOLACE) yesterday told ContractorUK that the public sector is not “sufficiently well-prepared” for the changes, which affect all the sector’s off-payroll staff from April 6th.

In a statement, the society explained that preparations have been difficult because the final legislation to enforce the changes is absent, as is the IR35 digital tool to bed them in.

“While the positon is not clear, [local] authorities are facing demands from contractors and agencies for increases in their rates,” a SOLACE spokeswoman said.

“It is difficult to counter those demands without certainty and guidance to explain how the new rules should operate.”

Despite the concern, official guidance on the April rules was released by HM Revenue & Customs earlier this month, alongside a note on the steps public bodies should take when engaging off-payroll staff.

But SOLACE says a “further risk is that contractors may at short notice simply choose not to work for local authorities, putting the delivery of critical services such as social care and children’s services at risk.” 

The spokeswoman warned: “This will simply place additional pressures on already over-burdened services.”

If the society does not receive a response to its call for a delay – it has written directly to HMRC – it expects the government to respond at Budget 2017, next Wednesday.

But it is not the only local government body to be warning against the government’s own policy from April, the Freelancer & Contractor Services Association (FCSA) understands.

In fact, the LGA, a cross-party group working on behalf of councils, and the CIPFA, an accountancy body for public bodies, are also pushing for the IR35 reforms to be postponed.

“I really hope that the voices of the LGA, CIPFA and SOLACE will be heard, and we fully support their cause,” said FCSA chief executive Julia Kermode.

“None of these changes would have been necessary if HMRC had properly enforced IR35 over the last 17 years. It is wrong to railroad badly planned legislation that effectively makes the public sector do HMRC’s job for them. It’s ill-thought through and is causing chaos.”

Evidencing her latter claim, Kermode said hirers in the public sector were finding it “impossible” to accurately assess the IR35 status of the contractors they engage.

She believes the delay in HMRC launching the IR35 digital tool – the Employment Status Service – is to blame. It is expected to go live tomorrow but was promised by HMRC by the autumn of last year.   

“We are [now] seeing sweeping decisions being taken by some public sector bodies banning all workers who operate through their own limited company,” the association said.

"Many contractors are simply deciding to leave the public sector, or seeking an increase in their rates, which in turn is exacerbating skills shortages and financial pressure in an already stretched public sector.”