Contractors to shun public sector following Autumn Statement IR35 ruling

The Autumn Statement's confirmation of IR35 is set to have a huge impact on public sector contractors.

Two thirds (66 per cent) of contractors are ‘very worried’ about the public sector IR35 tax reforms given the go ahead in last week’s Autumn Statement, according to new research from Crunch Accounting.

Additionally, nearly half (42 per cent) would no longer work in the public sector as a result of the outcome.

Philip Hammond confirmed that the controversial changes, which will see employers or agencies assume responsibility for confirming contractor status and the associated tax liability, are set to go ahead with no delay. The new IR35 rules, known as off-payroll working, will affect public sector contractors from April 2017.

The legislation, which was consulted on during the summer, has been widely condemned by industry bodies, with even the Treasury’s own Office for Tax Simplification raising serious worries.

Jason Kitcat, head of policy and public affairs at Crunch Accounting, thinks that the introduction of these new public sector IR35 rules in April 2017 are a huge blow to the self-employed community, as well as to the public bodies who will lose out on a substantial talent pool from next April.

Kitcat adds, ‘This decision presents enormous logistical and policy challenges that will have negative impacts on public services, flexible workers, and micro-business owners. Contractors falling under these rules will be paying the same taxes as employees without having any of the benefits, whilst also having to pay the costs of running their own firms.

‘While we agree that disguised employment is not desirable, we believe the solution lies in a more significant reform to tax and welfare systems to more accurately reflect the nature of modern business practices.’

He concludes, ‘On the whole, this Autumn Statement was a huge missed opportunity for the Chancellor to make some bold moves to rebalance the economy and show that the Government truly understands the huge contributions made by the self-employed.’

Further reading on tax changes

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the