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24/07/2017

The aftermath of IR35

Light bulb with tax written on it

Changes to IR35 mean that, in the public sector only, IR35 status will be determined by the client and not the contractor. This will not help a public sector already under financial stress, says Sasza Bandiera

On 6th April, changes came into effect for IR35, the ‘intermediaries’ legislation affecting those working through their own personal service company in the public sector. Town planning already suffers from significant skill shortages and excessive workloads following ten years of mandatory redundancies, predominantly in the public sector. Planning and development departments are now really feeling the brunt of constant spending cuts, with increased pressure on authorities to produce more with less. So - how will these changes affect the contract market within local authorities?

Contract town planners in local authorities are already paid 20 per cent above those in permanent positions. With demand so high, authorities have to pay uplifted rates to attract staff. The majority of contractors set up to work via a personal service company now face the prospect of working ‘inside IR35‘ through traditional PAYE methods – and thus paying more tax. In some cases, councils have had to further increase rates in order to ‘balance out’ contractors' earnings and stop contractors moving on. This price hike, however, has been too much for some organisations and contractors have simply moved on or are ‘sitting it out’ until the right role comes about. Not many have simply ‘accepted’ the loss in earnings.

"This new legislation will not help an already strained public sector"

Others will move back to the private sector, either to permanent positions or to contracts that are exempt from the IR35 legislation. However, the private sector does not come out of these changes unscathed,  feeling the effects during submission stage when applications are slowed down significantly due to a lack of public sector resource.

Despite all of this, public planning services continue to generate significant levels of income with increasing numbers of authorities identifying opportunities for planning performance agreements (PPAs). Income generated by PPAs is significant, so there is a pressure to deliver on them which in turn creates a need for additional staff who don't currently sit under the organisations ‘team structure’. In most cases they are prepared to pay for consultants to deliver them and work ‘outside’ of IR35.

This new legislation will not help an already strained public sector. But only time will tell how it will really affect the planning profession.

Sasza Bandiera is managing director of Oyster Partnership

This article appeared as an advertising feature in the June 2017 edition of The Planner.

Image | iStock

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