The Aftermath of the IR35

By: Sasza Bandiera

On the 6th of April, changes came into effect for IR35, the ‘intermediaries’ legislation affecting those working through their own personal service company in the public sector. Town planning already suffers from significant skill shortages and excessive workloads following ten years of mandatory redundancies, predominately in the public sector. Planning and development departments are now really feeling the brunt of constant spending cuts, with increased pressure on authorities to produce more with less. So – how will these changes affect the contract market within local authorities?

Contract town planners in local authorities are already paid 20% above those in permanent positions. With demand so high, authorities have to pay uplifted rates to attract staff. The majority of contractors set up to work via a personal service company now face te prospect of working ‘inside IR35’ through traditional PAYE methods – and thus paying more tax. In some cases, councils have had to further increase rates in order to ‘balance out’ contractors’ earnings and stop contractors moving on. This price hike, however, has been too much for some organisations and contractors have simply moved on or are ‘sitting it out’ until the right role comes about. Not many have simply ‘accepted’ the loss in earnings.

Others will move back to the private sector, either to permanent positions or to contracts that are exempt from the IR35 legislation. However, the private sector does not come out of these changes unscathed, feeling the effects during submission stage when applications are slowed down significantly due to a lack of public sector resource.

Despite all of this, public planning services continue to generate significant levels of income with increasing numbers of authorities identifying opportunities for planning performance agreements (PPAs). Income generated by PPAs is significant, so there is a pressure to deliver on them which in turn creates a need for additional staff who don’t currently sit under the organisations ‘team structure’. In most cases they are prepared to pay for consultants to deliver them and work ‘outside’ to IR35.

This new legislation will not help an already strained public sector but only time will tell him it will really affect the planning profession.