Contractors are being urged to check their IR35 status to resolve “confusion and uncertainty” over newly implemented changes to the application of the legislation in the public sector.

IPSE, which represents contractors and the self-employed, wants contractors to use an online tool set up by HMRC to ensure they don’t get placed in the wrong tax bracket.

From 6 April, here was a change in the way IR35 status determinations are made in the public sector.

It is now the job of the public sector organisation to determine the IR35 status of engagements rather than the contractor, as was previously the case.

If the public sector organisation deems the engagement to be inside IR35, they apply taxes to the contractor in the same manner as an employee.

HMRC released its Employment Status Service tool last month, to help contractors work out their IR35 status, but some public sector bodies have been taking a “blanket approach”, IPSE said, incorrectly deeming many people to be inside IR35.

The body is advising contractors to use the ESS tool and show the results to their clients.

Chris Bryce, IPSE CEO, said: “We urge all contractors in the public sector to complete the test and take the results to their client. This is the only way contractors can get fairness and clarity. HMRC has said it will stand by the results of their ESS tool and IPSE intends to hold them to this.

“Contractors provide great value and expertise to so many public sector organisations and it has now become a very real concern that there will be a major drain of talent moving away from the public sector. The government, and those public sector organisations deploying blanket approaches, must be very wary of the messages they are sending.”

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