A petition calling on the government to scrap legislation which could make it harder for local authorities to hire interim staff has garnered more than 14,000 signatures.
From April, new HM Revenue & Customs rules will pass responsibility to councils for policing compliance with the tax rules, known as IR35, on off-payroll working.
However, now the petition has passed a 10,000-signature threshold, the government is required to provide a response.
The petition says: “The proposal is to make ‘engagers’ deduct PAYE tax & NIC at source for self-employed people operating via a limited company if the end client is in the public sector.
“This will severely reduce the income of such individuals but confer none of the rights and benefits of a staff employee.”
A statement from the Local Government Association said that applying the IR35 rules just to public sector hires will make the sector a less attractive place for workers and recruitment firms.
It said: “Interim workers play a vital role in the delivery of services, enabling councils to manage peaks and troughs in what are often urgent demands in a cost effective and speedy way.
“The proposals will impact on that flexibility and ultimately could increase the rates local authorities have to pay for workers engaged to perform essential work, as those workers may seek to increase their rates in the expectation that IR35 will by default be applied to them.”
The LGA added that in the private sector it was possible for a different approach to be taken to the analysis of a contractor’s status that ” would mean they would fall out of the scope of IR35.”
A blog post by tax consultancy AbbeyTax this week said that Transport for London has decided to rule out using limited company contractors.
It also said that the education sector is closing its doors to engagements outside of IR35, but will still use umbrella or “deemed employment” contractors.
Tricia Wright, human resources director at TFL, said: “We are undertaking a root and branch review of how we are organised and operate.
“As part of this, we are significantly cutting the number of people appointed through agencies and reducing agency fee levels.”
She added: “Where it makes sense for us to employ people on a permanent basis, we are doing so and we are confident that we can deliver our multi-billion pound investment programme that will significantly improve transport for all Londoners.”
She said that TfL had reduced the number of people employed on non-permanent contracts by 900 since April 2016, but that in some areas there is a skills shortage, “which means there is a small pool of qualified candidates who often prefer to work on an agency basis”.
Paul Mason, national contractor manager at AbbeyTax, said: “It is an incomplete and varied picture. Both contractors and agencies really need to be talking to the public sector body engager now to understand the lie of the land — not least because some engagers like TfL want everything sorted out by Friday 17th February — and that’s coming up very fast.”
In a personal blog post this week, Steve Melber, director at healthcare recruitment firm Melber Flinn, said that delays by HMRC in providing clarification over the new rules was making the situation worse.
He said: “… I haven’t spoken to a single client yet in January who has had formal correspondence from HMRC outlining their new obligations to assess off payroll workers from April 2017.
“For many, my raising of the topic is the first they have heard of it, and the absence of good, and early advice from HMRC makes it all the more likely they will adopt [a] low risk, blanket all-in-scope decision.”
A survey of 500 contractors by website ContractorCalculator this week found that 80% said they will seek an alternative contract if the public sector contract is advertised as being caught by IR35.
Dave Chaplin, chief executive and founder of ContractorCalculator, said: “HMRC’s naïve conviction that contractors are going to roll over and accept these new conditions is going to have disastrous unintended consequences.
“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.”
In another blog post, Les Berridge, lead consultant at technology recruitment firm Networkers, said: “The new software tool designed by HMRC is widely regarded as not fit for purpose and clearly designed to find the vast majority of contractors to be inside.”
The government has not yet responded to the petition and it seems unlikely that it will reach the 100,000 signatures required to spark a debate in the House of Commons.
