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UK – More than 75% of public sector departments lose highly skilled contractors following IR35 reforms

05 September 2017

Three quarters of public sector departments lost highly skilled contractors following IR35 tax reforms, according to a survey from contracting site ContractorCalculator.

The survey of more than 1,500 contractors showed that the loss of the contractors have led to delays and cancellations of critical projects costing millions of pounds.

Further data from ContractorCalculator shows that, since the implementation of the IR35 reforms, which came into effect in April of this year, 27% of public sector contractors left the public sector. Meanwhile, 47% of projects lost at least a quarter of their contractors, 61% of contractors left because they refused to work under IR35 rules, and 52% of contractors who left the public sector are yet to be replaced. Furthermore, 50% of contractors have said they will now never work in the public sector if caught by IR35 and 46% will only do so if the Government effectively pays the extra tax.

“These findings should be a wakeup call to Government and serve as a prompt to repeal the entire legislation,” Dave Chaplin, CEO and founder of ContractorCalculator said. “HMRC was warned that this would happen and now we have the evidence that shows just how damaging the changes have been – diminished access to the flexible workforce has caused irreparable damage to multiple vital public services, projects have been cancelled and others are running over budget by millions of pounds.

“What’s more, we expect that HMRC is planning to roll out the reforms in the private sector which just goes to show how far removed from reality the taxman is,” Chaplin said. “Action is needed to prevent further decimation of our public sector services and stop a private sector roll out which will cause further chaos for contractors, businesses and the UK economy overall.”

The data from ContractorCalculator also showed that 25% of NHS departments have lost 50% or more of their flexible workforce while 79% of IT projects were delayed due to the reforms. The survey showed that 37% of IT contractors abandoned the public sector in the wake of the reforms.

“With Brexit and other challenges right around the corner, HMRC has chosen to shoot the public sector’s IT capability in both feet by sparking a contractor exodus,” Chaplin said. “IT contractors are in very high demand, could not be forced into false employment, so voted with their feet.”

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