In April 2017 changes to the operation of the Intermediaries legislation (IR35 as it is commonly known) came into force for the public sector. The key change was that the decision on the application of the rules moved from the individual providing the services (the contractor) to the body receiving those services. This was coupled with a change in the calculation and payment of the deemed payment liability from the contractor to the fee payer, i.e. the business paying the fee to the contractor’s personal service company (the PSC). Effectively taking the contractor completely out of the process. No changes were made where the services were provided to a client in the private sector.
There will be consultation on IR35 in the private sector. One suggestion would be to extend the recent public sector reforms to the private sector. The consultation will draw on the experience of the public sector reforms, and external research already commissioned by the government is due to be published in early 2018.
Individuals contracting via personal service companies, the end users of their services and any agencies which place these individuals with clients, will need to consider the terms of the consultation and the suggested outcomes. The experience with the private sector suggests that careful thought will have to be given to the accounting treatment of the deemed payment for the PSC and the lack of any appeal process against the client’s decision on whether IR35 should apply.