Recruitment reaction to the Budget 2016

Posted on: March 17th, 2016

At a recruitment sector update workshop on Wednesday morning we talked about the consultation which had just closed which looked to change some of the presumptions about IR35 treatment – at that point there had been no outcome from those consultations – but sure enough by Wednesday afternoon the Chancellor had stood up at his dispatch box and responded.

The press release sent out that afternoon stated that:

From April 2017, where the public sector engages an off-payroll worker through their own limited company, that body (or the recruiting agency if the public sector body engages through one) will become responsible for determining whether the rules should apply, and for paying the right tax. This strengthens the public sector’s role in ensuring that the workers it engages comply with the rules.

The government also recognizes that the current rules are seen as complex and can create uncertainty. It will therefore consult on a simpler set of tests and online tools that will provide a clear answer as to whether and when the rules should apply.

 

What does this mean to the recruitment sector?

As always details will follow, but we think this means that the shift of risk for not meeting IR35 exemptions will run with recruitment agencies for any unpaid tax and NICs. What the Government is almost certainly saying is that it will not lie with the relevant public sector body!

At the very least this means that agencies will need to ensure that their terms and conditions of engagement with candidates (and their personal company) should include an indemnity to pay the agency any tax and NICs which end up being met by the agency under these new rules.

Agencies may well want to think about carrying out their own due diligence with their contractors and their own companies to see how much of a risk the agency will place in placing the contractor – not easy since post- placement they will have little control over how the contract will work and therefore whether it will “fit” into the exemption criteria.
We will keep you updated as to the consultation on changes to the IR35 criteria “tests”!