PCG article about War on public sector contractors

[IR35FanClub]

Working as being inside IR35 doesn't meet the reuirement. They are demanding all contract income is subject to PAYE and NICs. At least IR35 allows some expenses plus 5%...

The only effective way to make this work is for them to insist all contractors come via umbrellas. But that's far too simple.

no theyre not demanding that. only for executive positions. the other two groups mentioned are long and short term contractors with specific skills they need. For longer term contractors ie 6 months and over they want a contract clause that says "i am paying the proper tax through either PAYE or my dividend tax credit" and for shorter term contracts they dont care.

It will be interesting to see what the "Contractor purchasing guide" they come up with says. Due by autumn. Maybe just in time for my renewal... and yes im working fo rthe gov at the mo, so am very interested in this.

[malvolio]

no theyre not demanding that. only for executive positions. the other two groups mentioned are long and short term contractors with specific skills they need. For longer term contractors ie 6 months and over they want a contract clause that says "i am paying the proper tax through either PAYE or my dividend tax credit" and for shorter term contracts they dont care.

It will be interesting to see what the "Contractor purchasing guide" they come up with says. Due by autumn. Maybe just in time for my renewal... and yes im working fo rthe gov at the mo, so am very interested in this.

Interesting, since that's not what the evidence I've seen is saying, it's beng done across the board. Have you a reference for that, PM if you prefer.

[LisaContractorUmbrella]

Does this help Civil servant 'contractor' staff to be paid as employees after six months in crackdown on tax avoidance | This is Money? My understanding is the same as yours Mal

[BolshieBastard]

.... they are disliked all the more.

Course they will be. But then Treasury will withold budgets to Departments that dont toe the line and make contractors work within IR35 or worse!

Look, I've no doubt your current practices are outside IR35 (or worse if Mal's scenario come to pass).

However, what you cannot deny is after the recent spate of stories of high profile people working for Gov Departments via PSC, the Government wants to stamp this out and make sure the 'fair share' of tax is paid (whatever that is) by anyone working on such a contract at 6 months and beyond.

They may have issued a consultation paper that says one thing now. That can be changed or simply re interpreted by Government, Treasury and Departments to mean something else. Personally, and it is just my opinion, I think people are being exceptionally naive depending on a first stage consultation document and, the premise that Departments spent a lot of time and effort in the past to give contractors watertight IR35 proof contracts, that that wont change and if you carry on as you are, you wont be affected.

I think you \ we will be affected. I think the government and Treasury will force Departments to rethink and change their approach to contracts, even if it means in the short term they'll shoot themselves in the foot.

[centurian]

Does this help Civil servant 'contractor' staff to be paid as employees after six months in crackdown on tax avoidance | This is Money? My understanding is the same as yours Mal

And that would have been my interpretation too - until I read the Treasury document.

2.2... In addition, an individual engaged off payroll may pay the correct amount of tax. For example, they may be:
working through a personal service company and genuinely in business on their own account, drawing the profits as salary or operating IR35 (see chapter 3).

3.6 There is no requirement for a personal service company to operate PAYE on their income provided that income is not from a contract which would be one of employment if the worker was not engaged through a personal service company. Many people who work through
personal service companies will choose to withdraw at least part of their profits as salary and pay the income tax and NICs associated with doing so.

It says that it's fine for the contractor to pay divs - as long as the contract isn't caught by IR35. But I can't find anything in the document that says the department should evaluate engagements against IR35, or insist that the contractor treats the engagement as being inside IR35, even for those > 220pd/6mths


However I also agree with RasputinDude - don't be surprised if it distills down to being a clause such as "you agree this engagement falls completely inside IR35" etc. Even if the guidance doesn't require that - some departments might take a stricter line to avoid getting hauled over the coals. Public sector is highly political and career progression has become severely limited with the cuts, so many FD's won't want black marks against them.

[SueEllen]

Public sector is highly political and career progression has become severely limited with the cuts, so many FD's won't want black marks against them.

If they are in a department which relies heavily on contractors to ensure their projects are actually delivered, I suspect some will push back particularly if their in their 50s and know they have gone as far as they can get.

[BolshieBastard]

If they are in a department which relies heavily on contractors to ensure their projects are actually delivered, I suspect some will push back particularly if their in their 50s and know they have gone as far as they can get.

Having worked permie in the civil service for 22 years, I'd be exceptionally surprised if anyone did this. They really dont give a ****. In any event, their annual appraisal marking has a significant impact on how big a pay rise they get.

With civil service pay severely cut, any extra gained via a better than good appraisal report is eagerly looked forward to.

The very people you mention as the ones to push back wont exist because they'll want as much money for themselves.

People in the civil service arent interested in 'pushing back' as you put it. They are about protecting their pension and getting a bigger payrise than the next guy.

[centurian]

WBBS

Public sector middle/senior management bods in their 50s are those that have most to fear from being flagged up on the bad-boy radar. The younger folks can still switch to private sector if they lose the battle, but those on their 50s have probably worked in the public sector for so long, they don't know how to do anything else - and probably couldn't earn the same salary anyway.

Their public sector final salary pension means they are heavily dependent on maintaining the maximum salary level right up to the day of retirement. Even being sidelined for their last 5 years and having their pay frozen - that puts a fair dent in their planned retirement income.

[SussexSeagull]

To be honest I have found public sector contracting to be something of a closed shop (especially SC stuff) so anything that shakes it up is welcome so far as I am concerned.

[malvolio]

To be honest I have found public sector contracting to be something of a closed shop (especially SC stuff) so anything that shakes it up is welcome so far as I am concerned.

"Shaken up" as in "made completely untenable and handed off to the cheapo offshore suppliers supported by St Vince" you mean?

Not sure that represents progress, myself...