Contractors' Questions: Do IR35 reforms cover indirect rail project suppliers?

Contractor’s Question: If I’m working through my PSC via a recruiter with a contract for a private company working on a large public rail transport project, what is my likely IR35 status from the sixth of next month?

I understand working directly for a public funded body is directly affected by the April 6th reforms to IR35. But I’m unclear if the rules only apply to that body’s directly employed contractors, or if they apply to anyone indirectly employed with a public body. Please clarify.

Expert’s Answer: As with almost everything to do with the new rules it seems, the answer is ‘it depends.’

HMRC provided additional guidance on this point on March 1st, which is intended to help identify if the contracts you have are within the scope of the reform.

For the new rules to apply, the individual must provide their services personally to the public sector client -- a condition which is not met where the public authority has contracted out the service to a third party.

Where a service is genuinely contracted-out, the third party will be responsible for determining the number of workers required to deliver the project, and the public authority is not involved in their selection. Although the workers may work with representatives of the public authority in order to deliver the project, the workers report to the third party, not to the public authority. So, whether or not your engagement falls within the scope of the new rules depends on whether the company which engages your PSC is providing a contracted-out service to the public body.

If a role was advertised in the public authority, or the public authority was involved in your being offered the contract, it is likely that your engagement would be considered in scope, as you will be providing your services to the public body. If, however, your contract was negotiated and agreed with the private company with no involvement of the public authority, this should be out of scope because your services are provided to the private company.

A point worth noting is that it is not whether or not a body is publicly funded which determines whether it falls within the scope of the new rules, rather the term “public authority” used in the draft legislation is confirmed as:

“A public authority as defined by the Freedom of Information Act 2000, or a Scottish public authority as defined by the Freedom of Information (Scotland) Act 2003 (asp 13).”

The expert was Rebecca Walker, an IR35 specialist status consultant at Abbey Tax.

Editor’s Note: Related –

Consultancy moves to ban PSCs over IR35 change

Contractors’ Questions: Where do the off-payroll rules catch consultancies?

IR35 reforms: Where Consultancies Are Caught

Tuesday 21st Mar 2017