IR35 reform 'to rob public sector of 9,720 IT contractors'

The public sector could lose almost 10,000 of its most skilled digital workers -- limited company contractors -- from April, a combination of data indicates.

The figure stems from a leaked outline of the government’s Digital Transformation Strategy (DTS), which is said to show the current size of the state’s digital contract workforce to be 18,000.

But just as the leaked document was obtained by the Register, a poll revealed that as much as 54% of such public sector PSC workers will quit, if plans to reform IR35 take effect from April.

Based on the DTS estimate, it means the public sector would suffer an exodus of 9,720 digital contractors -- workers who tend to be trained in specialisms that are absent or hard to find among the government's 12,000 full-time employees -- another figure contained in the leaked strategy.

'Never needed contractors more'

The figures coincide with an analysis by Deloitte, the accountancy firm, said to show the government to already be facing a civil service staff shortage of 30,000 to deal with Brexit.

“The public sector has never needed self-employed contractors more, they supply vital specialist skills on a flexible basis,” said Chris Bryce of the Association of Independent Professionals the Self-Employed (IPSE), which commissioned the poll.

“Yet the government is considering bringing in a measure that will drive these specialists out. This policy must be urgently stopped.”

Referring to the majority of contractors who intend to quit if April’s IR35 reforms bite, Mr Bryce said that such flexible workers, who are best suited for short government projects, would be leaving the public sector “altogether;” not redeploying.

'Damaging to public services'

“Government departments are working on over 500 Brexit-related projects,” he said. “The last thing we need is to put our negotiations to leave the EU at risk due to skills shortages in key areas.”

Under the proposals that threaten the exodus, the end-user or agency (‘the paying agent’) would be made responsible and liable for the IR35 status of the PSC contractor -- the party currently liable.

Mr Bryce reflected: “This measure, if implemented, would force the self-employed out of the public sector altogether, robbing it of a key, flexible resource and damaging the delivery of vital public services.”


Problematically for many, the government proposes to tax PSCs like employees, because even where IR35 is deemed to apply -- which indicates the workers are akin to their end-user’s full-time employees, they will not receive any employment rights.

“Many other business organisations are warning government of the potential for disaster on the delivery of public services if the measures are pushed through,” said IPSE.

“We urge [chancellor Philip Hammond] to consider this and use Autumn Statement to assure public sector bodies and the self-employed that the government will abandon this deeply concerning proposal, especially in light of the clear requirement for more resources to handle our exit from the EU.”

Editor's Note: Related --

HMRC 'unwilling to give any steer' on IR35 changes

Contractors set to reject IR35 payrolling from April

Public sector to lose half its PSCs over IR35 reform

IR35: Contractors face 13% income drop from April

OTS comes out against IR35 changes

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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