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71% of IT projects in the public sector have been delayed, or even cancelled as IT contractors drop out following the IR35 public-sector reform.

A survey conducted by Contractor Calculator found that three-quarters of public sector departments have been crippled by a ‘contractor exodus’ as a result of the IR35 change. This has resulted in putting off vital projects costing ‘millions of pounds.’

The full survey can be found here.

IR35 in the public sector

The public-sector IR35 reform came into force on April 6, 2017, in an attempt to tackle ‘disguised employment’, specifically in the public sector, but there is speculation as to whether this will be extended to the private sector.

The legislative change now means that if you’re a contractor working in the public sector, the public-sector body will be required to determine the IR35 status of the contractor.

Before April 6, 2017, the public-sector contractor was responsible for determining his/her own IR35 status – without any involvement from the public-sector body. If the contractor is caught under IR35, they will be required to pay National Insurance and Income Tax, just as an employee would, but without the employment rights.

Bound by IR35

This particular aspect has been criticised by IPSE, Self-Employed & Freelancer Association.

“This is insufficient. IPSE will continue to press this point strongly. If the government want to apply employment taxes, it should employ people and give them the appropriate rights,” IPSE said.

The government has faced mounting criticism as a survey conducted by CW jobs found that one-third of contractors decided to entirely avoid public-sector work due to the IR35 reform.

This change in IR35, also known as Intermediaries Legislation, is expected to generate £185m during the period of 2017/18. We recommend that you have your contract reviewed by a third party legal specialist.

At Gorilla Accounting,we offer anall-inclusive accountancypackage for Contractors and Freelancersfor just £85 plus vat per month.If you have any questions, get in touch with a member of our New Business Team by calling 0330 024 0406 or