Government publishes consultation on public sector tax reforms

Last week’s release of a UK Government consultation on proposed public sector tax reforms has been met with discord from associations representing those to be affected.

Both IPSE (Association of Independent Professionals and the Self Employed), and the FCSA (Freelancer and Contractor Services Association) issued their own statements in response to the consultation, Off-payroll working in the public sector: reform of the intermediaries legislation, warning the Government about its plans to reform IR35 legislation for public sector engagements.

The Government is seeking to apply employment taxes for public sector contractors. IPSE have stated that this will increase the tax burden on these organisations and the microbusinesses they rely on, hampering the delivery of vital projects.

The planned new rules will apply to all businesses that supply workers to the public sector. The public sector hirer will delegate their new responsibility to consider whether the contractor is inside or outside IR35 rules if the worker is supplied via an intermediary.

Julia Kermode, CEO of the FCSA, whose members provide professional support services to freelancers and contractors said: “The implications of the proposed changes will be significant – the new legislation could see contractors falsely put on the payroll and taxed at a higher rate when they shouldn’t be, or worse, that freelancers will be discriminated against as hirers choose alternatives to fulfil their staffing needs. It is a no-win situation in an already stretched public sector that relies on temporary workers.

“Government and policymakers frequently wax lyrical about the value of the flexible workforce, but this is not demonstrated by their actions. We will be engaging in the consultation over the coming 12 weeks and hope we can get them to see reason. ”

Chris Bryce, CEO of IPSE, also commented on the paper: “Public services will suffer badly from these plans. All businesses should, of course, pay the tax they owe. But the plans will impose disproportionate and punitive taxes onto the smallest businesses, and these talented experts will simply shun the public sector entirely and take on private sector work instead.”