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Private Sector Impact of the Public Sector Reform (IR35 Legislation)

This blog goes into detail about the impact if you are personally performing services to the likes of Network Rail, HS2, Crossrail, TFL and the Highways Agency via an engineering contractor or consultancy.

However, if you are undertaking work directly for an engineering consultancy or contractor on an infrastructure project then there isn’t an impact.

In the Autumn statement (2016) the Government announced that it would go ahead with changes to the IR35 legislation for those Personal Service Companies (PSC) working in the Public Sector. Essentially, the responsibility and accountability for determining whether IR35 applies will be changing to the Public Sector body instead of the Personal Service Companies owner.

IR35 itself and what it entails has not materially changed.

PSC Contractors working in the Private Sector breathed a sigh of relief as they retained the responsibility for determining their own IR35 status, working with their accountants and applying HMRC guidelines.

However, it is now clear that in a few instances the Personal Service company (PSC) working for a Private Sector Consultancy or Contractor are supplied to a Public Sector body like Network Rail on a Labour Supply basis. It should be obvious, and we hear phrases at Critical Project Resourcing like, “body shopped to”, “seconded over” , “working for Network Rail via the Engineering Consultancy”, “working in the offices of” or on “placement with”.

Critical Project Resourcing (or your current recruitment business) won’t necessarily know the contractual relationship between the engineering consultancy and Public Sector body like Network Rail, Crossrail, High Speed 2 (HS2), partly because we have never needed to and partly because recruitment is a defined function within a consultancy or contractor and we are not made privy to the operational side of the business.

What is labour supply in this context?

• “The named worker must personally perform or be under an obligation personally to perform the service.”

Basically, if the Public Sector body wanted you and only you then it’s personal supply and they determine the IR35 Status.

If the Public Sector body asked the engineering consultancy or contractor to design or build a new road or a new railway, and you are engaged with the Engineering Consultancy or Contractor, then there is no personal supply to the Public Sector body and you define the IR35 status.

Usually this can be easily identified without looking at the contract between the engineering consultancy and Public Sector body.

• Do you act as a line manager for the Public Sector body?
• Do you report to their offices and work off the Public Sector body’s systems?
• Do you hold identity cards like an employee at the Public Sector?
• Do you have a job title within the organisation?

If you are essentially “body shopped” into a Public Sector body by an engineering consultancy you will be within the remit.

However, if you are engaged in the engineering consultancy, even on Public Sector contracts such as railways or highways then provided it is contract deliverables type of arrangement the status quo is maintained.

What is happening now?

The Private Sector clients of Critical Project Resourcing who work with Public Sector bodies are cross-checking their contractual relationships with the likes of Network Rail, High Speed 2, Crossrail, TFL and the Highways Agency to see if there are any elements of Personal Supply.

But you will probably know already.

If you would like to discuss the topics in this blog in further detail, please contact us on 01732 455300.