The Association of Independent Professionals and the Self-Employed (IPSE) has advised contractors working in the public sector to personally check their IR35 status so that any confusion surrounding their tax status can be cleared. This advice comes after the recent changes made in the tax rules for contractors working in the public sector.
IT contractors and other contractors have been asked to take a new test using the new status tool introduced by HMRC. This test will ensure that the contractors know for sure the amount of tax that they need to pay.
The tax rules for the public sector have put the onus on the public sector organisations to determine each contractor’s IR35 status. The contractor no longer has the liberty to do this themselves. In case the public sector body judges that a contractor falls within the purview of IR35, they will tax the contractor just like they would tax a full-time employee.
HMRC introduced a new tool called the Employment Status Service tool in March. IPSE believes that using this new tool will allow contractors to figure out precisely their IR35 status, and HMRC has assured contractors and the public sector that the taxman would accept the results of the test.
IPSE is recommending this approach as it believes that a large majority of public sector organisations is adopting a blanket approach, and therefore most contractors are falling within the IR35 bracket. This comes after there were reports of local doctors and other contractors being judged by NHS trusts to be inside IR35.
IPSE CEO Chris Bryce stated that public sector organisations have not been given enough time to prepare for the new tax regime and therefore have not been able to follow the guidelines laid down by HMRC. As a result, it is causing a lot of confusion among contractors and public sector organisations.
Bryce is urging all contractors to take the test and get the results so that they can take them to their client and ensure that they are placed in the correct tax bracket.