Public Sector Inside IR35 - Still worth taking contracts?

[gables]

The one public sector IR35 contract someone has asked me about died a death as soon as my current rate requirements were revealed to them..

And I would still have been 50% cheaper than the consultancy they are using instead...

And this is (one of) the most annoying facts about this whole situation

[psychocandy]

The rate hike seems relatively common now many PS clients are seeing contractors leave rather than risk retrospective taxation if staying in same role post April 2017, and attracting new contractors at the old rate is proving difficult.

However I almost daren't think about this as the normal tax situation of approx 45% (so take home around 55% via normal route when inside IR35), but if the rate hike is sufficient to offset most of the IR35 pain then it also means we'll be in the higher tax bracket sooner, and I don't want to think that means take home will be much lower than 50%.

So not only will contractors be leaving to avoid IR35 they may also leave when they reach higher tax bracket and the hit becomes even more painful.

But in my case, they did hike the rate sufficiently to cover it. Like I said, some left because of the retrospective thing and some left because they could no longer claim for hotels etc.

Either PS client had no choice but to stump up extra cash. Which I then give back to government in tax. Pointless.

[psychocandy]

As ever, it's going to vary by client, role and location.

I've spoken to people who had received a 70% increase, people who had negotiated a 45% increase, people who were on projects where everyone was offered a 20% increase, and people who have been told "there's no increase, that would defeat the purpose of you being inside IR35".

I would encourage those who have been through the negotiations (whether you stayed or left) to contact the policy team at IPSE so that there are specific examples that can be referenced when talking to press, politicians and civil servants.

And these are the clients where all the contractors leave.

In the real world, government departments just want the work done. They don't care about the costs. If all the contractors leave and they can get no-one else on the old rate then it just gets pushed up the chain. In a lot of cases, they have no choice but to increase.

In my case, the conversation (with agent) was short and the issue was resolved quickly:-

Agent "Role at xyz"
Me "Brill close to home"
Agent "Rate is normally X but its definitey inside IR35 PS"
Me "hmmm"
Agent "But loads of contractors have left so client knows they've now got to up the rate so will X+35% do it?"
Me "OK then"

[TheFaQQer]

For what purpose? To show that public sector implementation of IR35 isn't working and further changes are required?

Depends whether one thinks that would result in reforms that benefit everyone, or a clampdown on rate increases in the spirit of IR35 as to whether that may or may not be a good idea.

Arguments without data are never well received.

The usual response to any statement of "this is a bad thing" would be "how bad?". Having case studies to explain the impact that a change has (politicians love to be able to say "Mr Smith, one of my constituents, wrote to me and said...") are important in winning hearts and minds.

[nosolog]

In response to the title question, it depends on the overall rate you will be earning. Obviously if it is a lot higher after tax and NI than a similar public sector permanent job then it could be worth continuing for the flexible working conditions that contracting offers (ie the ability to take months of annual leave off rather than your normal statutory annual leave allowance in a permanent job).

The contractors I know who used to have their own limited companie but now have to work through umbrellas are losing £9-20 thousand per year compared to their previous wage through limited companies. After transport and accommodation costs they are making a similar amount to their previous permanent jobs minus public sector pension benefits but they only remain in contracting because they need heavy annual leave allowance.

Certainly in my industry the contract rate of pay has gone down by about £100-150 a day over the last 5 years, there certainly has been no increase in rates to offset the IR35 rules.