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IR35 Tax Walkouts

Major public sector projects will suffer the brunt of contractor walkouts over the impending IR35 tax hike, according to new research. An overwhelming 85% of public sector contractors will leave their posts if hit by HMRC’s tax avoidance legislation that comes into force in the public sector from next month, according to tax advisor Qdos Contractor.

IR35 would require contractors to be taxed as employees - adding 25% to their costs - without receiving any benefits of full-time employment, and public bodies will be charged with identifying contractors who fit the bill from 6 April.

But Qdos’s survey of 2,000 UK contractors found that 95% believe public sector projects will suffer as a result of contractors downing tools and leaving, because of the reliance on outsourced skills. That would put projects like the NHS’s Windows XP mass migration at risk, as well as major IT projects in various Whitehall departments.

A quarter of those surveyed fear for the NHS’s future without contractors, while half believe central government departments will suffer most. Others cited projects at specific departments like the Ministry of Defence, and even corporations like the BBC.

Qdos CEO Seb Maley said: "Whether it’s the NHS, HS2 or government departments for that matter, it’s fair to say that every public sector body or project will be worse off should there be a walkout.

"The threat not just to the public sector, but UK contractors and agencies makes it all the more important that well-educated, expert decisions are made when it comes to setting IR35 status.

"Changes are a matter of weeks away, and HMRC’s tool for determining IR35 status has only just been released. Questions remain over its effectiveness and accuracy, and put simply people are still wondering what to do."

The tool, currently still in beta, is a series of questions to determine whether contractors will be hit by IR35, but was recently found to have got a third of historic IR35 cases incorrect.