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How To Help Public Sector Clients Prepare For New IR35 Reality

The changes to IR35 due to take effect from April 6th will significantly change public sector contracting – and recruitment agencies can play a valuable role in helping their clients get up to speed.

Here are four things you can do to support your clients as they come face to face with the imminent changes.

 

  • Appreciate and understand the new responsibilities

This isn’t a time for public sector organisations to bury their head in the sand. From April this year they will become responsible for determining the IR35 status of every temp they work with that operates through a personal service company (PSC).

This is likely to be a costly and time-consuming process just to manage the administration alone. Added to this is the risk that clients could face rate increases, claims for employment and workers’ rights, or a dwindling supply of skilled workers. Clients will also become liable if HMRC believes they have made the wrong IR35 determination.

Where relevant, agencies could ensure clients are aware of their obligations, and the fact that they could be liable for outstanding tax if HMRC rules against their decision about a temp’s status.

Why not share our guide to IR35 with your clients so that they get a full understanding of the changes and the impact?

 

  • Build a Strategy and Communication Chain

Although the governments’ newly published Finance Bill states that the public sector hirer may be liable if they do not take “reasonable” care when making an IR35 assessment, the fear for many contractors and industry professionals is that clients take a blanket approach and opt to simply “catch all inside IR35”. Subsequently this would force all PSC workers, regardless of their actual status, towards PAYE.

However, with a clear strategy in place this need not be the case. Clients should develop procedures to manage the increased burden and facilitate an appropriate and thorough review process in order to make a fair assessment for each of their engagements. This will also help prevent losing resources unnecessarily through delays or lack of understanding.

Increased communication pathways and improved correspondence between clients and their recruitment agencies will also be vital. If a contractor’s assignment is caught by IR35, you will be required to calculate, deduct and pay taxes for that worker and prepare and submit Real Time Information (RTI) reports for them as well. It may even become necessary to alter the payment terms of the contract in order to make the relevant deductions.

 

  • Plan for public sector exodus

It is expected that the upcoming rules might deter contractors and temps from taking on public sector roles in the future. In this instance, recruitment agencies could take the lead by providing details of current contracts that are more likely to fall within IR35 from April, and inform their clients of the level of contractors likely to move to the private sector, where the IR35 changes do not apply.

Additionally, recruiters should have a plan in place to retain critical staff and build their talent pool to fill new openings. Don’t forget that you could be instrumental in negotiating new contracts on behalf of your temps.

Also, check out our blog on how to respond when candidates are in short supply.

 

  • Prepare to challenge HMRC

If HMRC rules against a public sector organisations’ decision on IR35 status, then they might be required to provide evidence and reports to justify their decisions.

As the recruiter, you could safeguard important documentation on your client’s behalf to assist with any such challenge.

If you are concerned about the upcoming changes or want further clarity, do get in touch. In the meantime, why not download our free and comprehensive guide to IR35.