Public Sector Contractors – IR35 and What to Do


Urgent action is required by all contractors to public sector organisations to check whether the terms of their arrangements fall foul of the new IR35 legislation.

New rules from 6th April 2017, referred to as the intermediaries legislation, will affect all people that work in the public sector through an intermediary such as a personal service company or other agency such as a recruitment agent.

At the heart of the change is a requirement for the public sector end client to assess whether a worker is caught by IR35, or alternatively, if that worker is genuinely self-employed.  If the worker is caught by IR35 then the new regime requires the intermediary company to deduct income tax and national insurance from payments to the worker.  So the intermediary will be responsible for employment taxes as if the individual was an employee even though he may be expecting to be taxed more leniently as an interim or a contractor.

It will become the responsibility of the individual to provide all information needed to help determine whether the off-payroll rules should apply.  With this information in hand, parties can use the HMRC Employment Status Service tool to help reach an assessment of whether the rules apply.  At the time of writing this tool has yet to be made available, and although is likely to be based on existing guidance, industry sources have been critical of the delay with implementation just a few weeks away.

HMRC believe that the changes will only affect non-compliant contractors, although any person working off payroll in the public sector would be well advised to review their arrangements prior to the implementation of the new legislation.


If you are a public sector contractor and require further advice on IR35, please contact Edward Garston, a Senior Associate in the Company Commercial Department. Call on 01708 229444 or email

This article was written by Edward Garston, a company commercial solicitor at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of February 2017.


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