IR35 reforms set to decimate public sector

GOVERNMENT services will be decimated if proposed reforms to IR35 in the public sector go ahead, with 80% of contractors planning on abandoning the sector rather than accepting a contract inside IR35, a study has found.

The government will also lose out on £115m in taxes and could face an increase of £610m rise in costs per year for hiring contractors if these workers are put on the payroll.

These are just some of the findings to come out of a survey of over 500 contractors conducted by ContractorCalculator, an online resource for contractors.

Dave Chaplin CEO and founder of ContractorCalculator commented: “HMRC’s naïve conviction that contractors are going to roll over and accept these new conditions is going to have disastrous unintended consequences.  Four out of five respondents said they would turn down an inside-IR35 role and seek opportunities elsewhere because a typical contractor would have to increase his or her fees by 30% to earn the same income if deemed to be inside IR35.

“HMRC’s proposed reforms hang on the premise that contractors will readily accept having the same amount of tax deducted as employees, without receiving any employment benefits such as sick and holiday pay.”

HMRC believes the reforms will yield an additional £400m in tax over the coming tax year from 20,000 contractors.