Some agencies are expressing concerns that the IR35 rules that have currently been applied only to the public sector will over time cover those contractors who work in the private sector. These agencies believe that this could happen within two years.

This was the message from a recent seminar organised by Lawspeed, a contractor legal specialist.

Lawspeed Managing Director Adrian Marlowe said: “I am on record as saying that the legislation is badly drafted and I stand by that.”

Referring to the fact that the hirer can become under certain circumstances the fee payer, Marlowe said: “This is truly extraordinary, and HMRC does not appear to have thought this through. Wherever legislation contains anomalies and ambiguities, HMRC can expect those affected to review their operations, and it is incumbent on us to explain the issues and possibilities that follow. That these rules will cause confusion and disruption in the short term is in no doubt whatsoever, but some clear options do exist.”

The seminar met to discuss ways in which agencies could protect both their margins and their relationships with public sector employers.

Legal consultant Ben Grover said: “The first thing is to know who you are dealing with. It is critical to know whether a client is a public authority and this may not always be clear. Once you are sure the rules apply then make sure they are followed. For example, use of the terms ‘outside or inside IR35’ has no place within legislation, and therefore no impact.”