Public Sector IR35 Test – Human Resources Decide Contractor IR35 Status

Public Sector IR35 Test
Public Sector IR35 Test

Public Sector IR35 Test

Private sector contractors can learn from contractors in the public sector and what they experienced when the IR35 reforms went in there. This is an article from 2017. It’s a word of caution to those who decided to sit the Check Employment Status for Tax test and passed it.

Contractors in the public sector should prepare more for the new public sector IR35 Test.

This week, one Government department gathered up 5 contractors to do the test together.

They do similar jobs so the reasoning was that they would all either be inside or outside IR35.

The contractors’ manager was there and the Human Resources lady was there too.

For each of the questions they went for a majority vote.

Contractors Sat IR35 Test Together

On some of the questions, they convinced the manager that they should answer one way only for the HR woman to tell the manager that this was not the case and to reverse his decision.

Once HR have involvement in this sort of decision you know you are in trouble.

They are completely risk averse.

So, you know now what the results of their IR35 Employment Status Test before I even tell you.

Yes, it found that they were all inside IR35.

Pay IR35 Tax or Join Umbrella Company

Now, they must either pay the IR35 tax or join an umbrella company.

All of them are currently using limited companies.

They now face the problem that while the public sector IR35 Test shows that they are inside IR35, they are currently operating via personal service companies.

They have been at the department some time. So, this means that they have been operating ‘illegally’ at the department.

Telling HMRC Results of Public Sector IR35 Test

It seems that when a department takes the IR35 test, the results must be sent to HMRC.

That could cause a problem in itself.

These constants changes, these constant attacks on contractors, are making the job much harder. It’s certainly making the job much less lucrative.

Yet, now there is the prospect that the Government will make private sector contractors take the IR35 Test in the future.

Contractors Not Ready for Public Sector IR35 Test

One problem the contractors above had was that they were not ready for the IR35 test.

They hadn’t previously sat the test themselves. The request to sit the test came out of the blue.

They didn’t have the preparation of having sat the test before and had a chance to think about it to make their case.

So, contractors should prepare beforehand and click on HMRC IR35 Employment Status Test to find out more about it and to sit the test.

It’s crucial you do it before they come for you. Let your fellow contractors know about it too.

They might get tested together with you.


See How Companies Can Help Contractors Stay Outside IR35

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    1. At the end of the day, the determination sits with the public sector body and should reflect their interpretation of your contractual terms and conditions – without shadowing the contractors, this is the only way for HMRC to evaluate the contractor.

      In all the conversations I have had, the chances are that you will fall into IR35 because the public sector (and specifically HR) are notoriously risk adverse. This has been the case despite having all the usual contractual safeguards – client requests the use of equipment supplied by them, right to substitution (I even have an arrangement in place with a similar skilled contractor).

      Bottom line – you are unlikely to escape being inside IR35 if you perform a role that can be found on a normal programme, project or departmental organisational chart.

      I for one have taken the decision to move away from the public sector, but it is likely to only be a matter of time before IR35 is rolled out to the private sector – so we should all party like it’s 1999


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