REC Technology - Reshuffle is time for rethink on review of public sector appointees and controlling persons legislation
A major priority for high-end recruiters and interim management providers over the last few months has been to push back on proposals in the government's 'controlling persons' consultation that would threaten the use of contractors and interims.
Although any proposed legislation will not come into force until next year, the Danny Alexander review, published in May this year, made clear that in the interim all government departments using off pay roll contractors would have to adopt a new assurance process to ensure that they are able to satisfy themselves that ‘off payroll engages are meeting their income tax and NICs obligations.’ The REC and the Interim Management Association (IMA) have argued against any knee-jerk regulatory response and underlined the crucial benefit to employers of being able to quickly deploy highly skilled executives on short-term contracts.
This is a major issue for a number of our Sector Groups. Picking up on recent developments, Les Berridge, a member of REC Technology's executive committee, makes the point that: “We are seeing worrying signs of public sector employers jumping the gun and changing their terms of business to include undertakings from limited company contractors about their tax position - including many who work in the IT and technology field’. Les also confirmed that: “There appears to be a perception that contractors and other non-PAYE workers are doing something wrong and are a PR risk which is complete nonsense”.
Feedback from REC members confirms that some public bodies have already taken steps to review their use of contractors and have implemented contractual measures that contractors will need to adopt moving forward. There is a lack of consistency between departments which highlights that fact that clear guidance is required. This is something the REC is taking forward with the Treasury and other government departments. Last week’s reshuffle must also signal a rethink on how proposed measures are taken forward
The Cabinet Office has published Procurement Policy Note 07/12 which, sets out details regarding how government departments must now implement the recommendations made in the Danny Alexander review. The policy places new burdens on contractors to provide evidence that they are tax compliant, but any steps to impose impractical measures on contractors will only adversely affect the ability of government departments to hire the expertise they need.Our message to government is that this is not just an issue for recruiters and individual contractors. Ultimately, public sector employers will lose out if they can no longer access the skills and knowledge of specialist contractors and interims. Underlining the link to IR35 rules, Les Berridge makes the following point: "The real problem is the recently issued guidelines on IR35 which did not take on board our proposed weighting system. This was a missed opportunity for giving contractors clarity on their IR35 status and helping HMRC know which cases to investigate. ”
The REC's campaign on this issue has involved building a strong collective voice with other representative bodies such as PCG, IOD and APSCO. We will continue to push for a workable solution.
For addition background information on this area, read my previous blog on the topic. http://www.rec.uk.com/press/news/2188