About 30 out of 32 IT contractors at the UK Hydrographic Office have staged a walkout since the end of August. The remaining contractors are now handling tech-related issues.
The agency, while refusing to reveal the number of contractors that it presently had, did acknowledge that a vast number of its IT contractors had stopped working from the end of August.
The dispute between the contractors and the agency is because of the IR35 tax rules. These rules apply to self-employed individuals who are employed by a limited company that they own. Such freelancers are considered off-payroll employees and do not contribute to PAYE tax on their earnings from the end client.
HMRC is not taking this avoidance of PAYE tax lightly and is looking to prevent this from occurring by making sure that public sector companies treat freelancers as payroll workers. However, if freelancers can provide evidence that they are on the right side of the IR35 rules, then the end client can treat them as off-payroll workers.
One IT contractor stated that public sector departments typically inform contractors that as long as they get an independent contract review to establish their eligibility under IR35 rules, the departments consider it evidence to prove that the contractors are paying the right amount of taxes. However, the UK Hydrographic Office has stopped accepting contract reviews as a pre-emptive measure and is making demands that are difficult to accept.
The UK Hydrographic Office stated that it had given contractors a choice – to agree in writing that the department could tax them in the same manner as salaried workers or to stop working for the agency from 1st September 2016.
Most of the IT contractors were not in favour of this solution and therefore stopped working from the end of August.