Skip to Content

IR35 public sector tax changes

IR35 public sector tax changes
Wednesday, August 09, 2017

Earlier this week on the Panthera blog, we asked a question - When does a contractor become an employee?. That’s one article that has really generated a response and got a lot of you to get in touch with us. 

But why should such an article get you talking? It’s all about changes that have been made lately to the IR35 system where work is being carried out to benefit a public sector organisation or a private company owned by a public sector organisation. 

Panthera examines the changes. 

IR35 public sector – what’s changing? 

The law itself isn’t changing on what contractors deemed to be disguised employees pay. 

As you know, if a contractor’s work is deemed to meet IR35 stipulations, then the contractor company must pay tax and National Insurance as normal through the RTI (real time information) system.  

This has always been controversial because the amount of tax an IR35 contractor pays is absolutely identical as if he or she was a normal employee. 

However, they do not benefit from normal employment rights and expectations – holidays, sick pay, maternity/paternity/adoption leave, auto enrolment pensions and of course protection from unfair dismissal.  

On top of that, they normally have to pay a servicing company (between £1,000-£1,500 a year) plus an accountant and a bookkeeper. It’s not a very good deal for them. 

Up until now, it has been up to the contractor him- or herself to determine whether IR35 stipulations apply to them. Savvy contractors will structure contracts, working procedures and practices, and so on to be as bulletproof against HMRC investigation as possible. Even nearly 20 years after its introduction, IR35 confuses a lot of people and companies (and some tax inspectors) so the whole situation has never been clear-cut anyway.  

What changed on April 6th this year (2017) was that if a contractor is working for a public sector body or a company or organisation owned by a public sector body, it’s now up to the public sector body or associated company (or the servicing company that places them) to declare whether IR35 applies or not. Power has been taken away completely from contractors. 

IR35 public sector – what difference will it make? 

Contractor forums (like the excellent Contractor UK) report that they are hearing from their members a much higher risk aversion from clients in the public sector who do not want to make mistakes with IR35 classification. 

IPSE director Andy Chamberlain, writing exclusively for Contractor UK, states that “(t)he draft legislation puts the burden of responsibility on the entity that pays the contractor. Very often this will be an agency. However, agencies are unlikely to have sufficient information about the working practices so they will ask the client to give an opinion on IR35 status. The client is statutorily obliged to provide an answer within 31 days.”  

Contractors will increasingly find themselves in a situation where neither the agency or the public sector body is well-informed enough about either the law or the specific circumstances of the contractor’s duties to make an informed judgement. 

Again from the Contractor UK site, Ministry of Defence procurement officers and officials are now tell all contractors to join the PAYE or leave (link). 

IR35 public sector – clear as mud  

In order to assist contractors, agencies, and public sector officials, HMRC have launched an Employment Status Service questionnaire – you can find it here.

There’s a problem though, as discovered by the team over at Contractor Calculator. Many contractors using the service are being told by the questionnaire that their IR35 status is “unknown”, even though they have answered all the questions. 

It entered the results of 21 historical IR35 court cases into the ESS. 27% of the answers produced by the ESS said “unknown”. And 10% of the scenarios that a judge deemed to not meet IR35 criteria were described by the ESS as meeting IR35 criteria. In this situation, who can a contractor trust? 

IR35 public sector – share your views 

Have you been affected by the IR35 public sector tax changes? Please get in touch with the team on 01235 768 561 or email

What our clients say

For us, there is nothing better than a happy customer. Here are just a few that let us know how much we mean to them.

Pete Dungey

Simple, efficient and most importantly, hassle-free.

We found Panthera via our search for a Xero expert. We knew the software we wanted to use, and needed a forward-thinking accountancy partner who could get us up and running, and teach us the ropes moving forward. Tory and her team have always been on hand to answer our questions, and help us to grow as a business, particularly during periods of big change, such as becoming VAT registered. They are always on hand to alleviate any concerns and help to keep our records in order, which makes our year-end accounts an absolute breeze! Being based in Bristol, our relationship is entirely email based, alongside one consolidation meeting at year end - this keeps things simple, efficient and most importantly, hassle-free.

Pete Dungey Kaleido Grafik Limited
Anita van Eijndhoven

Talk Our Language

The support and service we receive from Panthera Accounting is very good. Everything from regular meetings, a prompt e mail response and the transition of our Xero software (which we find very pro active indeed) has and is all remarkably efficient. We find Panthera talk our language and make any process as painless and easy as possible.

Anita van Eijndhoven Quidne-IT
Ash & Tim Lane

Panthera brush aside the stereotype of the typical accountant

We got in touch with Panthera Accounting by way of a recommendation; we haven't looked anywhere else since. They are an extremely professional yet relaxed group of people. We were slightly daunted by the idea of accountants but Panthera brushed aside y the stereotypes. They are very understanding when answering any questions we may have. They are completely efficient, offer sound business advice, and are fantastically priced. We will continue to recommend them.

Ash & Tim Lane Starveacre Fencing
Jayne Johnson

An Asset to my Business!

The whole team at Panthera are great! Working with them has been a huge support to my growing business. They help me to understand the numbers I need to know. They give me technology solutions like Xero so that I can process things quickly and have access to my own figures. They are quick to reply, highly knowledgeable, nothing is too much trouble and as well as making sure that everything is compliant and on time, they are enthusiastic, professional and fun to work with.

Jayne Johnson Better People
John Baker

Absolute joy - they provide a first class service on every level

Working with Tory and the team at Panthera is an absolute joy - they provide a first class service on every level; from simple Xero issues through to more complicated tax enquiries, they’re always on-hand to help me get it right. I’m certainly not their biggest customer, but I’m always made to feel like their most important one.

John Baker BKR Solutions
John Castle

Professional and Friendly

I would like to say that Panthera Accounting have helped me with my business accounts for more than 4 years now. They have consistently offered an excellent competitively priced service that works both professionally and in such a friendly way that I would highly recommend them to everyone considering using their services.

John Castle Ilexanna Limited & Birch Castle Homes Limited
Jonathan Morrison

They are always there to answer queries and sort out issues

I had been with Mr Dunn for 20 years when upon his death Panthera took over the business. They now play a bigger part in the running of my business, they do all the stuff that has to be done but I don't like doing ie book keeping, VAT, wages, and returns. They are always there to answer queries and sort out issues and make sure all Tax deadlines are met. Their costs are fair, service is great and I have and would highly recommend them.

Jonathan Morrison Wallingford Builders
Pippa Scott

Professional, friendly and personal service.

Panthera Accounting have gone above and beyond the call of duty to guide and support our Company. They offer a professional, friendly and personal service that can take the stressful and sometimes frightening feelings out of running a business. They have guided us through the working of Xero and have offered “teaching sessions” on the day to day running of the accountancy package. Our only regret is that we didn’t join their team earlier.

Pippa Scott Scott's Commercial Services Limited
Sara Southey

Panthera puts the personal back in to accountancy!

Tory and her team have provided a friendly, approachable and helpful service from the start. They have delivered a quality service, above and beyond anything I could have expected. Panthera, with the help of the Xero package, have taken the stress, strain and confusion out of managing my company and personal accounts. I look forward to working with them for many years to come.

Sara Southey Bluestones Garden Design
Tracey Miller

Panthera are fantastic.

Panthera are fantastic. Always professional, going the extra mile for their clients and delivering superb service. I recommend them all the time to my clients.

Tracey Miller Bigger, Brighter, Bolder BBB

Contact Us

Panthera will use the details that you have entered into this form to communicate with you on the subject of your message, and for no other purpose.
Please see our privacy policy for more details on how we manage your data.

Lets Get Started

Move to Panthera

Moving to Panthera is as easy as 1,2,3...

  1. We jump on a quick call to create the perfect service package for your business
  2. You e-sign your terms of engagement
  3. We get your authority to talk to HMRC on your behalf

And that’s it! From contacting your previous accountant, to updating Companies House with your new registered office address, let us handle all of the admin so that you can get on with running your business, safe in the knowledge that everything is going smoothly in the background.

Talk to Us