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IR35 https://www.stoneseed.co.uk/stoneseed-blog/tags/ir35 Thu, 17 Oct 2019 20:55:14 +0000 en-gb IR35 and Private Sector IT. You Are Here! https://www.stoneseed.co.uk/stoneseed-blog/ir35-and-private-sector-it-you-are-here https://www.stoneseed.co.uk/stoneseed-blog/ir35-and-private-sector-it-you-are-here The Private Sector IR35 countdown clock is ticking louder and louder. Before you can say "non-compliant off-payroll Project Manager", it will be time for private firms to follow the Public Sector pioneers into this new world.

It's come around quick, hasn't it? One of my accountant friends drily commented the other day, "It doesn't seem like two minutes since we took down the IR35 decorations!"

The use of contractors in IT Project Management has greatly increased over recent years. With good reason, many businesses see contractors as a way to quickly hire the specialist IT skills that they need, without having to commit to a permanent hire. It can be justifiably argued, that operating in this way has given businesses greater agility to respond to the market needs of the present, and innovate to meet the market needs of the future.

This has not escaped the attention of the HMRC though.

After, in the view of the taxman, a highly effective rinse of the practice in the Public Sector, eyes turned to the Private Sector where the cost of a disguised employment to the treasury was projected to increase from £700 million in 2017/18 to £1.2 billion in 2022/23.

Which is how we find ourselves where we are - however many days, weeks or months away form IR35 day we are when you read this.

Those three words are key - "where we are".

I think acknowledging where you are is the most important thing that you can do right now.

I have spoken with employers who are 100% ready and I have spoken with those are 100% not. I have talked with those that know they have to do something and those that have buried their head in the sand. Some have a clear road map; others have a roughly sketched plan. Some could go on Mastermind and answer questions on IR35 as their "Specialist Chosen Subject" and at the opposite end of the scale we have heard one "what's IR35?"

It is a very broad spectrum. Everyone is on their own journey (and working at their own pace), but the inevitability is that we must all arrive together. The important bit is accepting where you are on the map and then taking the next step.

You'll have seen those maps at the shopping mall or the theme park or the zoo. There's always this huge, confusing expanse of stores, rides or animals and a very big arrow with a very simple message - YOU ARE HERE. If you want to get to the handbag shop, the big dipper or the elephants, knowing where you are in relation to them is key to planning your journey. So, it is with IR35, knowing and accepting where you are is vital to plotting your journey to April 2020.

Knowing where you are, allows you to calmly assess your options. Do you bring your contractors in-house and add them to your payroll? Do you absorb costs associated with IR35, or have an awkward conversation with your clients? Or do you completely re-frame your thinking on project resourcing and consider way to eliminate 'disguised' employment altogether, resourcing through Stoneseed's Project Management as a Service (PMaaS), for example, where our people are on our payroll and where IR35 is essentially de-scoped.

I'm writing this in April 2019, but you could be reading it in July, December or even closer to the deadline in 2020! And it almost doesn't matter - as long as you accept that YOU ARE HERE and work from there.

We have put together a calendar which will help you with resource planning for IR35. This is based on our experience helping organisations transition their resourcing models and feedback received by both Stoneseed and our sister company, Access Talent (the IT Project Management Recruitment Specialists). You can find the calendar here

Summer 2019 will be remembered, as much for the heatwaves, barbecues and paddling pools as for gauging current work forces, resourcing chains and tax liabilities. By the end of July 2019, I'd say that you need to have a robust understanding of your current work force, crucial contract roles and also have a strong sense for how rate increases may affect you. You should have started planning new processes or investigated alternative resourcing channels like PMaaS, where IR35 becomes irrelevant. Summer would be a good time to have started stakeholder conversations too, so that there are no unexpected surprises.

By November, hopefully, the only fireworks will be the ones marking Guy Fawkes night as you advise contractors of your plans. Remember, that this is a worrying time for contractors whose livelihoods are potentially about to change. Prevent undue worry by engaging and informing your workforce throughout.

By Christmas and New Year, reflections on "another year over and a new one just begun" should be complemented with reflections on your current contractual arrangements and amending them to fall in line with April's changes.

The first quarter of 2020 should then be a time to prepare to hit the ground running: training your people on any new processes, engaging stakeholders, assessing new job roles and adverts for compliance.

Then, my favourite: by April 2020, you should have a bottle of champagne in the fridge ready to toast all your hard work and your organisation's compliance.

Glancing at these, you may feel your heartbeat start to race and your blood pressure begin to rise. What if you're late? Don't panic! We've been through this with the Public Sector and we are here to help your business, wherever you are in the journey. You Are Not Late.

One of the most common lines we hear from clients is "we are so late" and, looking at the calendar, this may be your reaction too.

In truth, you're not late. You are where you are!

Remember those three words: YOU ARE HERE!

It's the quality of your response to this that will matter in April 2020.

I had this exact "we are late" argument with a HR Director friend who said that having embarked on a compliance mission after the Public Sector changes, his firm was now six months late. Then two months passed, not much progress was made, and he told me they were now eight months late. It took me a further month of telling him "You are here" for him to accept this and take positive action - (thank goodness, otherwise by this point he'd have been nine months late!!!)

The point of this is that you will be late if you are not compliant by IR35 day, until then YOU ARE HERE.

So, accepting that, what's your next step?

Find out more about IR35 and PMaaS

Project Management Sun, 05 May 2019 09:11:40 +0000
IR35 - A Wake Up Call For Off-Payroll Working In Private Sector IT https://www.stoneseed.co.uk/stoneseed-blog/ir35-a-wake-up-call-for-off-payroll-working-in-private-sector-it https://www.stoneseed.co.uk/stoneseed-blog/ir35-a-wake-up-call-for-off-payroll-working-in-private-sector-it IR35. Tick-tock, tick-tock.  

Time is running out for you if you hire IT or project talent resources in an off-payroll capacity. You need to get ready NOW and adjust working practices that have become habits because WE ARE PROBABLY LESS THAN A YEAR AWAY from a universal roll-out of the IR35 reforms that the public sector 'enjoyed' last year.  

I honestly believe that the question now isn't "Will this happen?" but rather - "When will it happen?".   

I think the answer is April 2019.

The clue for me is in the timings of the consultation processes. Prior to the reforms in the Public Sector, HMRC published their consultation document on the 26th May 2016. This closed on the 18th August 2016. Then, just 8 months later, in April 2017, the reforms were implemented.

Fast forward to 2018 and HMRC have published a consultation document on the 18th May 2018, which closes on 10th August 2018. Does that look familiar? The May/August/April pattern worked and it looks like HMRC are favouring a Ctrl C/Ctrl V approach ... a very likely case of history repeating itself.

Last time, ahead of the Public Sector shake-up, HMRC were confident the reforms would yield the desired result - increased tax revenues and greater compliance. As it transpired, they did! So this time around, equipped with actual evidence and buoyed by experience, they are even more confident.

According to HMRC, the cost of non-compliance in the private sector is high and growing - projected to increase from £700 million in 2017/18 to £1.2 billion in 2022/23,

Evidence suggests that the Public Sector reform has been effective in increasing compliance. HMRC has analysed PAYE data covering the first 10 months of the reform, from April 2017 to February 2018 and it shows that, in any given month, there are an estimated 58,000 extra individuals who are paying income tax and NICs whilst undertaking work for a public authority. This increase in PAYE employment is also reflected in an increase in tax receipts, HMRC estimates that an additional £410 million of income tax and NICs has been remitted from these engagements since the Public Sector reform was introduced.

The Government is making noises that it needs more cash, only this week two influential think tanks voiced a view that the NHS needs an extra £2000 from every household to stay afloat. It seems highly unlikely that a measure that would boost tax income would not be implemented! Whether the government truly understand the negative impact this could have flexible working is another matter but, be honest, if you were the taxman, you'd press on.

Of course, the good news is that while HMRC is better prepared with lessons learned, so is the private sector. You can take advantage of the experiences of public sector counterparts and the conditions that they faced and make preparations now. For instance, now is the time to get ready for changes in the labour market, affecting both availability and cost. You should also start to consider the impact on contracts you sign now if they are over 11 months long and start to think ahead accordingly.

Let's be clear, if we are to learn just one thing from the Public Sector experience, it’s time to start preparing and looking at your Project Portfolios for 2019, and how these will be resourced. Could you access more Project Management resources "as a Service"? Do you need more budget for increased salaries? These and a raft of Other questions need addressing now.

So What Will Happen?

Let's assume that we're right and the private sector has to deal with this in 2019. Our experience of the way it was applied in the Public sector reform was that it was all pretty straightforward. Whilst many contractors were deemed to be outside IR35 (by ‘passing’ the CEST test, and having the appropriate working practices supported by their client) a significant number didn’t result in constrained supply constrained and rising rate.

HMRC estimates that around a third of people working through their own company should fall within the rules and be taxed as employees. However, currently, only 10% of this group actually determine they should be taxed in this way. Look at HMRC's illustrative example, ironically reflecting the work of a Project Manager ... Charlie.

ILLUSTRATIVE EXAMPLE 1: The non-compliant off-payroll project manager

Charlie is a project manager working through a limited company (his own PSC). A private sector company, ABC Ltd, contract with Charlie’s PSC from 6 April 2018 to 5 April 2019. Charlie’s working practices are such that he would be an employee of ABC Ltd if he contracted directly with them. Charlie’s PSC charges ABC Ltd £50,000 for his services, and his PSC is not registered for VAT. Charlie follows a typical strategy, paying himself an income tax and NICs efficient salary.  Charlie’s PSC pays corporation tax on the remaining payment from ABC Ltd, and he then chooses to distribute all remaining income from the work to himself as dividends.  Charlie personally pays £2,119 in income tax. Charlie’s PSC pays £7,899 in corporation tax. The total income tax and corporation tax paid would be £10,018.

Charlie is not currently compliant with the off-payroll working rules. 

However, if Charlie was compliant, the total income tax and NICs (including employer NICs) due on the payment from ABC Ltd would be £15,041, having taken into account a 5% expenses deduction allowable under the off-payroll working rules in the private sector. As a result of Charlie’s non-compliance on this engagement £5,023 less tax is paid. Charlie has not paid any NICs as the salary he has paid himself is at the same level as the primary/secondary NICs threshold.

Thomas is an employee of ABC Ltd, doing the same job as Charlie. Employing Thomas also costs ABC Ltd £50,000 a year, in salary and Employer NICs. The total income tax and NICs due (including employer NICs), from Thomas and ABC Ltd, is £16,047. This means that despite Charlie and Thomas doing the same job, the total income tax and NICs paid is £13,928 less as a result of Charlie’s non-compliance.

When corporation tax payments by Charlie’s PSC are taken into account the total tax and NICs lost is £6,029. Both ABC Ltd for Charlie’s services and Charlie pay less.

“This is not fair to the compliant tax paying population, who ultimately have to bear the costs from others not paying the correct tax”

Basically, they think its fair, it works and it generates significant tax revenue. The questions raised in the consultation document are not really about whether this should be done, but more about how it should be done. Slam dunk!

Our PMaaS model can help you take IR35 out of the equation for a very simple reason - it doesn't apply.

PMaaS & IR35 - Find out more 

Project Management Wed, 06 Jun 2018 10:45:04 +0000
IR35. What Next For IT? Private Sector pain? https://www.stoneseed.co.uk/stoneseed-blog/ir35-what-next-for-it-private-sector-pain https://www.stoneseed.co.uk/stoneseed-blog/ir35-what-next-for-it-private-sector-pain If you have had anything to do with Public Sector IT procurement over the past two years or so, either as a client or a contractor, IR35 has probably never been far from your mind.

My friend, a Public Sector IT Project Manager, jokes that he'd started seeing IR35 everywhere, "It's been the topic of water cooler conversations, seminars, newsfeeds. I had to laugh, even on holiday a cocktail bar, Bar 35, had replaced 'ES' with '35', you know, like you do with passwords ... so Espressotini became 35PRESSOTINI. This was cute until I perused the menu some more and saw 'VIR35CENCE', 'FIR35TONE' and 'SAPHIR35'!”

That does sound quite TIR35OME!

The fact is that IR35 ‘off payroll” legislation shook up Public Sector IT service procurement.

We said it would.

We also said that client organisations and contractors alike had to act to be prepared for the April 2017 implementation. Some did, some didn't. As a result, some suffered greater pain than others.

There has been something of a collective sigh of relief from many in the IT sector over fears that the government would extend the new IR35 ‘off payroll’ rules ... but those sighs may be short-lived.

Although it was not explicitly outlined in the last Budget speech, other documents released on the same day mentioned the possible extension of the rules for personal service companies in the Public Sector to workers in the Private Sector. I believe that the government has effectively shown its hand, and will consult in 2018 on how to tackle ‘non-compliance’ with the intermediaries’ legislation in the Private Sector.

Our own businesses give us a unique vantage point from which to observe and comment.

Stoneseed provides Project resources into both the Public Sector (where the new rules apply) and the Private Sector (where they don’t). Also, while we favour the use of our own employed resource (where IR35 becomes irrelevant), we also work with a number of Personal Service Companies (where it is highly relevant).

Stoneseed's sister company, IT recruitment specialist Access Talent, is in regular contact with many influential IT HR leaders who are feeding a constant sense of the mood music of the industry. It allows us to speculate with some confidence and authority on what will happen further down the line.

To get a sense of what the Private Sector can expect, let's leverage hindsight to give us some foresight and reflect on the impact of IR35 on the Public Sector.

Recent research by APSCo found that the Public Sector is suffering the consequences of the new IR35 rules, with almost three-quarters of recruiters (70%) finding contract placements in the sector have dropped since April 2017. Almost half (45%) report increasing charge rates for contractors. On the face of it, that’s a dramatic change but the truth is, we don’t really know yet what the real fall in resourcing looks like yet. We suspect that the impact on the Public Sector, whilst significant, was not quite the predicted apocalypse.

A number of factors have effectively softened the blow, and there may be key lessons here for the Private Sector.

1 - Some Public Sector organisations have planned ahead very effectively, and turned to alternative resource models. They may have increased internal staff headcount, or accessed talent through the "as a Service" markets with partners who can provide employed (ie. PAYE) staff. The thing is - they did something - they acted positively - and it worked.

2 - Many PSCs have understandably taken the view that the new rules have swung the pendulum too far the other way, and now they have the worst of both worlds. They are taxed as an employee but without the benefits and the employment rights. However, for some (and this depends very much on circumstance) the tax maths have not been quite so dramatic. The restructure of tax rules on dividends have meant that the increase in their tax burden is not as significant as it once was. They have absorbed the cost and moved their contract to Umbrella Terms.

3 - Some have renegotiated terms. They have adopted variations on the above themes and brokered compromise arrangements, such as a slight increase on day rates to compensate for the increased tax burden.

4 - Many PSCs with a highly prized skill set have increased their rates significantly, keeping their take-home pay at the same level – ironically the Public Sector have footed the bill for these increases.

5 - Many have taken the IR35 Test and adapted. They have used HMRC's online tool to effectively take themselves out of the scope of the new rules, naming substitute workers, working to a clear Statement of work with defined deliverables etc.

6 - Many contractors took themselves out of the equation altogether by moving their skills to the Private Sector.

For many, this is a case of balancing risk. We don’t really know, at this stage, how aggressively HMRC are going to challenge PSCs, but certainly, given the requirement for intermediaries to report back to HMRC on off-payroll workers, they now have the information at their fingertips.

So some lessons, but the burning question for many is – will the rules be extended to the Private Sector?

This is what they've said, “The government will carefully consult on how to tackle non-compliance in the Private Sector, drawing on the experience of the Public Sector reforms, including through external research already commissioned by the government and due to be published in 2018 ... a possible next step would be to extend the reforms to the Private Sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.”

It's a pretty clear statement of intent, isn't it.

I think the question is probably easier to answer in reverse ... Why wouldn’t they extend it to the Private Sector?

One thing I have learnt about tax is that, although it can be incredibly complicated, it is (in the main) pretty logical.

I fail to see any logic in applying one rule in the Public Sector, and then not applying it to the Private Sector. The new rules have worked ... kind of ... or at least they haven’t failed!

Look at this from HMRC’s perspective if you can. The general direction of travel for tax for the last 4 years is to tax employees less and company shareholders more, I appreciate I may have oversimplified things here, but take a look at some simple facts. Over the last four years, the government has ...

1 - Increased basic and higher rate tax bands (unless you work in Scotland!) thereby reducing the amount of tax paid on PAYE income.

2 - Effectively taken away the tax-free basic rate band on dividends (replacing with a £5k allowance), the preferred mechanism for most Company Shareholders to reduce their tax burden, whilst still paying Corporation tax on company profit.

3 - Effectively narrowed the tax gap between contract and permanent workers. Contractors will often still pay less tax, but there is now at least a debate to be had once you throw in some of the benefits of sickness pay, paid holiday, pension etc.

By extending the legislation to Private Sector workers the government could fast-track this process, and potentially (some would argue) level the playing field. Furthermore and, as alluded to earlier, by introducing it into the Public Sector there has undoubtedly been a leaking of skills into the Private Sector. Why wouldn’t HMRC seek to plug this leak?

It’s quite clear what this means for the Personal Services Companies, but what does it mean for the engaging clients?

Well disruption, for one thing, an increase in day rates and undoubtedly a need to review current resourcing models.

This could be only 15 months away.

Let that sink in.

You could have just five business quarters to prepare.

How quickly does that time go?!

If we are to learn anything from the Public Sector experience it should be that now is the time to start preparing.  Begin looking at your Project Portfolios for 2019, and how these will be resourced. Will you be ready for a hike in costs ...?

... or are there other delivery models that might provide the answer?


Find out more about the impact of IR35, we have produced a handy update for companies and organisations affected: Download it now

Contractorcalculator.co.uk - APSCo survey

Project Management Tue, 23 Jan 2018 12:51:36 +0000
IR35 - How to avoid Public Sector IT talent shortages https://www.stoneseed.co.uk/stoneseed-blog/335-ir35-how-to-avoid-public-sector-it-talent-shortages https://www.stoneseed.co.uk/stoneseed-blog/335-ir35-how-to-avoid-public-sector-it-talent-shortages When the Government announced changes to IR35 and off-payroll working rules for public sector workers like IT contractors, a wave of confusion rippled through online forums used by contractors and hirers alike. There are some great online resources that explain the changes, not least the one published by Stoneseed, in this post we'll explore ways to protect your organisation from the changes to IR35 and the potential implications that they may have on your IT operation.

Firstly, a brief catch up.

IR35, also known as the Intermediaries legislation, was a response to perceived ‘tax avoidance’ by contractors operating as Personal Service Companies (PSC) but fundamentally behaving like employees - what became known as "disguised employment". Clearly many contractors deliver services to clients that could not be construed as disguised employment and so there needed to be a test to define which talent fell into which category and guidance on who was responsible for making the call.

From April 2017 there will be a significant shift in responsibilities and liabilities. Simply put, responsibility to determine a public sector contractor’s IR35 status shifts from them to you, the end-client.

The government acknowledges that there will be "a significant initial impact" but seem to consider that this will be mainly confined to extra admin duties for public sector organisations. However, many public sector hirers are also raising fears that contractors will either increase their prices to mitigate any extra tax due or that they may shift their talents to the private sector, in which case the hiring body could face higher costs and may struggle to recruit the best talent.

According to a survey by the Recruitment and Employment Confederation (REC), few public sector hirers are in favour of the changes with almost seven out of ten HR managers (69.5%) fearing a negative impact in terms of increased wage bills, their ability to attract talented individuals and their ability to afford the experienced contractors required.

Furthermore, the Association of Chartered Certified Accountants (ACCA) warned off a “significant risk” as public sector organisations are likely to mitigate the potential risk of liability by using only large outsourcing service providers, again with cost implications for the sector.

Most commentators and observers agree that implications will reach further than extra paperwork, to what extent will depend largely upon how ready for the change organisations are. There are a number of things that you can do now to protect yourself.

1 - Start The Conversation NOW

Organisations that are dependent upon contractors should have started the dialogue with their talent already and if that’s you and you haven't - start now. To be clear, the client needs to take the view on whether a particular service provided falls inside or outside IR35. In the interests of fairness to all, this is a judgement that is better made in a calm, measured fashion before the rules changes rather than in a rushed panic afterwards.

Having made your judgements, you will then have time to react to any decisions made by contractors on how they will operate moving forward, i.e. if they stop providing their services to the sector you will have some space to seek an alternative.

2 - Consider the Project Management as a Service market

This is probably the cleanest way to mitigate risks. Although it is true that booking contractors through agencies might shift liability to the intermediary, the IR35 decision will rest with the public sector organisation as opposed to the agency and as buyers realise this they are increasingly looking to G-Cloud for inspiration.

All public sector organisations can use the G-Cloud or the Digital Marketplace to find people, services and technology for IT projects. The Project Management as a Service (PMaaS) market offers you a complete range of Project Management services, including full Programme Management Office(PMO) providing assessments, governance, tools and people to improve your delivery capability and performance. Best of all, engaging services this way is unlikely to be perceived as "disguised employment".

Early adopters are also benefitting from consistently high-quality IT Project Delivery, often with no net increase in the overall portfolio costs and are grateful to the IR35 changes for practically forcing upon them the opportunity to rethink their approach to IT.

3 - Be Proactive And Seek Win/Win Arrangements With Contractors To Keep Them Outside IR35

In some cases, IT contractor arrangements can be defined to ensure that they do fall outside IR35. If you currently arrange substitute talent when your contractor is ill, for instance, this would ‘fail’ the IR35 test and be deemed as "disguised employment" but shifting this responsibility to your contractor might rebalance the judgement. Again, accessing talent through a legitimate Project Management as a Service arrangement would be the clearest way forward.

It is recommended that public sector hirers and contractors work through HMRC's IR35 criteria together to find work around solutions that work for both client and contractor but ultimately, more importantly, the tax man! An independent review may be the best way to ensure compliance.

In conclusion, time is running out and for public sector bodies doing nothing is not an option. Many IT contractors that I talk with are already considering their future outside the public sector. It is vital that you do everything that can to keep them outside IR35 or convince them of the benefits of coming "on payroll" with you (good luck with that) or you risk losing key contractors and the crucial strategic skills they offer. Many public sector organisations are skipping this step altogether by reimagining their approach to IT services and project delivery procurement, furthermore, having entered the ‘as a Service’ market many are wondering why they didn't do it sooner.

Find out more about IR35 and Project Management as a Service from Stoneseed

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Project Management Sun, 19 Mar 2017 09:33:38 +0000
IR35. Public Sector IT skills shortage? Time to prepare for change. https://www.stoneseed.co.uk/stoneseed-blog/317-ir35-public-sector-it-skills-shortage-or-opportunity-of-a-lifetime https://www.stoneseed.co.uk/stoneseed-blog/317-ir35-public-sector-it-skills-shortage-or-opportunity-of-a-lifetime Planned changes to IR35 in April next year are potentially going to have a seismic effect on public sector IT. How much depends on how prepared the sector is by then but now is the time to act.

It's time to hit the G-Cloud and get to grips with what's new in the Project Management as a Service (PMaaS) market.

Briefly, here's what's about to happen distilled to its very essence in a paragraph.

IR35 is a piece of tax legislation that exists to decide if a contractor operating as a small Personal Service Company (PSC) is behaving like an employee or a contractor and make sure they pay tax accordingly. The big change set for April 2017 is that it will be whoever engages the talent that determines this. If that's you, and it is later deemed that you called it wrong it will be YOU who is liable for the tax.

Public sector contractors are incandescent. On average, they have less security than employees and they don't get holiday or sick pay or many of the other perks that come with being on the payroll. As it stands, this will not change after April next year, even if it is deemed by the hiring organisation that the contractor is engaged like an employee, they won't be required to treat them like one.

On the one hand, you can see why they're up in arms. On the other, you can see how PAYE taxed employees get vexed sharing an office with someone doing the same job as them, even brewing up from the same kettle as them but paying less tax and National Insurance and often getting to claim back their mileage for the commute into work.

There is a bit of moral question here. Everyone is banging on about big companies avoiding tax. A small Personal Service Company (PSC) perhaps with only one director, a specialist in their field, doing 6-month assignments here and there, is clearly behaving like a proper company. If this legislation drives this type of person out of the market, that’s not great. At the same time, a long term, never move contractor sat next to a permanent employee, doing the same job for two years could be argued to be rather letting the side down. You could argue they have no employment rights, have higher risk etc., but the longer the contract goes on the more that argument is watered down.

Similarly, some firms and public sector bodies only offer contracts on this basis to avoid commitment, employee rights and dare I say employer's national insurance contributions. This kind of practice from hirers is also rather out of kilter.

Employees, contractors and the tax payer deserve fairness. Contractors are an important part of the supply chain, but there does need to a levelling of the playing field in everyone's interest.

Setting aside the PAYE staff and the SA302 army to battle that one out, I am more concerned about the impact that this change will have on public sector IT. Many analysts are predicting a skills shortage in public sector IT and it's hard to find a case to disagree with them.

Many contractors are saying that they will simply move out of the public sector and work exclusively with private firms who will be exempt from the changes (for the time being at least - but you imagine it will only be a matter of time before the tax man switches attention that way too).

The public sector is engaged in some really important IT Projects. These are projects that deliver services at the cutting edge of society, many are crucial to the health and wealth of the nation.

Whereas business case aligned private sector IT Projects deliver return on investment measured on a profit sheet, public sector IT projects often get benefits to the needy, healthcare to the sick and government services to those who rely on them. The last thing this sector needs is a skills shortage.

It's more than that, though.

Faced with a skills shortage, because of the importance of these projects, public sector IT buyers are going to have to look for ways to plug gaps. If they default to the big half a dozen IT consulting firms, where costs will be higher, the government could ironically recoup more tax only to squander it paying more for IT.

The smarter alternative would be to turn to the G-cloud. On the government's IT procurement programme, there are IT firms providing IT advisory and Project Management as a Service using permanent staff so IR35 does not apply and there is no risk. PMaaS could fill any gaps that IR35 changes create. In fact, as firms on the G-Cloud are ready to trade with the public sector you can make arrangements now that ensure that you are ready to weather the ensuing storm.

Beyond the cost, there's the hassle that comes with this new responsibility.

The test of a contractor's IR35 compatibility is currently woollier than a Christmas jumper. There are some criteria that determine whether your contractor is behaving like a ‘proper’ supplier, for instance, can they put in a substitute worker and can they choose their own hours of work, but the question of whether they are they subject to supervision, direction and control of the end client is a nonsense. Under guidelines, if they are, they are behaving like an employee. You show me an IT Project where contractors are not subject to sponsor supervision, direction and control and I'll show you a project that's about to contribute to those regularly quoted failure statistics.

With PMaaS you get accountability, assessments, governance, tools as well as people to improve your delivery capability and performance, often with no net increase in the overall portfolio costs and best of all no need to worry about IR35.

You may also find that when you engage the right Project Management as a Service you find yourself relying less on contractors. You may enter a world of predictable cost models, high-quality Project Delivery and cultural alignment that actually improves your in-house capabilities.

IR35 may be the cause of a skills shortage and runaway costs that scupper your public sector IT Projects.

Alternatively, it could be the stimulus of a rethink, an opportunity to try a new way.

Something scary, or something exciting. Ultimately, the choice is yours.

To repeat myself ... "Planned changes to IR35 in April next year are potentially going to have a seismic effect on public sector IT. How much depends how prepared the sector is by then but now is the time to act."

Time to choose.

We'll see you on G-Cloud.

Find out more about IR35 and Project Management as a Service from Stoneseed

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Project Management Sun, 27 Nov 2016 12:17:12 +0000