Public sector BETs on new IR35 guidance

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Contractors working in the public sector are being made aware of changes to the way in which IR35 status is assessed.

‘Off-payroll’ rules introduced in 2012 state that any public sector contractor earning at least £220 per day, on an assignment anticipated to last six months or more, must demonstrate they are paying the correct amount of tax.

Following HMRC’s decision to scrap controversial Business Entity Tests (BETs) earlier this month, the Cabinet Office has published new guidance for central government departments and NHS bodies that engage contractors, freelancers, consultants and other off-payroll workers.

The nine-page document states:

"Departments should determine the employment status of all their off-payroll workers, regardless of how the worker is engaged."

In reference to contractors working through their own personal service company (PSC), it adds:

“The worker should be able to provide evidence of a contract review to say that they are outside the scope of the IR35 legislation at the six-month point. If the terms of the contract remain the same, the assessment of the service company will not change for the duration of that contract.”

So what does all this mean for contractors?

Juliet Byrne, legal and technical director at ClearSky, believes it will largely be a case of ‘business as usual’.

She said: “In essence nothing has changed, apart from the fact that the BETs are no longer used to assist the department, ie the client body, in discerning if IR35 should apply to an engagement.

“Interesting points include the fact that independent IR35 reviews, such as those provided by ClearSky, are confirmed as acceptable. A department can also stipulate in advance the information it wants to be covered in a review.

“The odds are that, in practice, nothing much will change for contractors themselves.”

Get in touch

If you are a public sector contractor in need of a professional IR35 review, call ClearSky today on 0800 032 5326.