So it seems like the public sector bodies will have to be extra vigilant while deciding the IR35 status of those contractors they will engage with from 6 April 2017. This is because if they fail to exercise “reasonable care”, they will automatically become responsible for paying Employer National Insurance and for deducting National Insurance and PAYE from the PSC workers’ original pay!
This move might make the agencies’ work easier but it will certainly add to the stress of public sector bodies who are required to inform the former about the IR35 status of all the contractors working under them. However, if the end clients fail to do so, it will negatively impact not only them but also the contractors along with the agencies.
There have already been reports in the past of end-clients attempting to impose a blanket ban on the limited companies. In fact, many public sector bodies are attempting to dodge their compliance requirements by insisting the contractors work through umbrella companies. This declaration has subjected those PSC workers to pay taxes via Pay As You Earn (PAYE) – which is completely wrong if their contract has not been fully assessed as to whether it is inside or outside IR35!
Nevertheless, this action is viewed as completely unprofessional on the part of the public sector bodies who seem now to just be desperately trying to find an easy way out. Therefore, it is important for the end clients to take necessary measures so as to properly assess their contractors. After all, no one wants to pay wrongful taxes or come under the radar of the taxman for the wrong reasons!