IR35 reforms 'forcing PSCs into early retirement'

Droves of experienced public sector consultants have simply quit limited company contracting and retired early, due to the IR35 changes in the public sector.

Revealing this upshot of the April 6th rules, a tax advisory said it has helped contractors suspend, move from or shut their PSC, since the changes took effect almost two months ago.  

“A significant number of mature contractors [are still] deciding to throw in the towel and take early retirement,” said the advisory, the Anderson Group.

“Others are either closing down their companies or suspending them while they seek low cost umbrellas to work their public sector contracts through.”

Not helping, and potentially deterring their replacements, is a batch of agencies that “either refuse to accept the changes or don’t understand them,” said the advisory’ s Barry Roback.

“Putting this hopefully unrepresentative section of the market aside,” he said. “the majority of compliant agencies, together with their public sector clients, have simply taken the decision that it is far too risky to engage a limited company contractor without applying PAYE to their corresponding gross payments.”

Ultimately, the accounting adviser warns, it will be public sector, taxpayer-funded organisations -- not contractors finding themselves retired -- that will suffer.

“In the long term, it is the public sector that will suffer the most as the pool of top quality contractors dwindles over time while becoming much more expensive to engage,” Roback said.

Speaking ahead of the rules’ 2-month anniversary next Tuesday, he added: “It is already clear that the regulations are, as predicted, having a profound effect on the public sector contractor market.”