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Public sector bodies accused of freezing out SME IT consultancies over IR35 compliance fears

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Public sector bodies accused of freezing out SME IT consultancies over IR35 compliance fears

Tech-focused small and medium-sized enterprises (SMEs) are being shut out of public sector contracts as risk-averse government departments fear finding themselves on the receiving end of multimillion tax bills for IR35 compliance errors, it is claimed.

A Public Accounts Committee (PAC) report in May 2022 confirmed that mistakes made during the implementation of the IR35 reforms in the public sector, which came into force in April 2017, had so far left government departments owing £263m in unpaid tax to HM Revenue & Customs (HMRC).

As revealed by Computer Weekly in July 2021, the Department for Work and Pensions (DWP) was among the first to declare, in its accounts for the 2020-2021 financial year, that a review of its IR35 compliance procedures had left it owing HMRC £87.9m in back taxes.

Since then, details of the IR35-related tax bills incurred by other departments – including the Home Office, the Ministry of Justice (MoJ), and the Department for Environment, Food and Rural Affairs (Defra) – have emerged.

Fearful of befalling a similar fate, it is claimed that some government departments have tweaked their hiring policies and are enforcing bans on the use of consultancies whose directors are actively involved in the delivery of the service their companies provide so they do not have to carry out IR35 status determinations for these engagements.

As a result, it is being claimed some departments have opted to avoid carrying out a status determination by simply cutting their SME suppliers loose.

That’s according to Romy Hughes, director of private and public sector digital transformation consultancy Brightman, who told Computer Weekly that she has witnessed this first-hand, and claims HMRC’s enforcement action against government departments is to blame.

According to the government’s own Digital Marketplace sales dashboard, Brightman has previously secured contracts with the likes of the National Crime Agency and HM Land Registry. 

“It is because HMRC actively went after bits of the public sector and levied fines against them [for IR35 errors] that the fear across the public sector of getting things wrong is huge. It’s the fear of an unexpected fine or tax bill that has really driven this behaviour more than anything,” she said.

“Any SMEs like ours, where my business partner and I work in the delivery of the service, are being deemed too risky to use by some of our [public sector] customers, and therefore they do not want to include us in their procurement pipelines,” she said.

“What we’ve got is a situation where public sector is cutting out huge amounts of SME expertise, and they’re not even getting as far as doing an assessment to say that you’re inside or outside IR35. They’re simply saying, ‘If you work as a director of an SME on delivery, we simply won’t have you in our supply chain’.”

Speaking to Computer Weekly, Dave Chaplin, CEO of compliance firm IR35 Shield, said – from a legislative perspective – he can see why public sector organisations may be responding in this way.

“The public sector appears to be trying to make sure they are not the ‘client’ from an off-payroll working point of view so that all services are delivered on a ‘fully contracted out’ basis. That means service delivery by the provider, without having to do any IR35 determinations at all,” he said. 

“If the director of the provider is also a shareholder of the service provider, then the off-payroll working [rules] comes into play for that person, because they have a material interest in service provider, and a determination needs to be made. This is just one of many damaging consequences of the ill-thought through legislation.”

This “consequence” also flies in the face of the UK government’s overall commitment to ensure more procurement spend is awarded to small businesses, continued Hughes, and could set back the pace of digital transformation within the public sector considerably as time goes on.

“These public sector organisations are beginning to curtail their ability to digitally transform their organisations by acting this way, and they’re removing all of the expertise and intellectual influence from that and pushing themselves into a corner where they can only rely on the big consultancies to deliver change,” continued Hughes.

“It’s an unintended consequence of IR35, because what’s really happening is the administrative overhead of [doing determinations] puts the public sector off, and that problem is only going to get worse with the [proposed] civil service headcount cuts. So, we’re in a position now where it is increasingly difficult to do business as an SME with the public sector.”

Changing attitudes

Hughes said she first picked up on this change in attitude towards the use of SME suppliers in March 2022, citing a marked rise around this time in the number of inside IR35 contracts appearing on the government’s Digital Marketplace procurement hub.

“We have seen a significant policy change across the public sector since March where even contracts that were clearly outside IR35 are being listed as inside IR35, which is quite surprising,” she said.

“The customers will see an increase in price if they put those contracts inside IR35, which means the public sector is willing to take a hit on the public purse – and not an insignificant hit either. You’re talking in the region of 20%.

“If you did a financial assessment of the risks of the fine compared to walking into a significant price increase then that seems to be a crazy assessment that’s happening there.”

Hughes’ observation of an uptick in inside IR35 roles within the public sector is supported by data accrued by Ricky Whitfield, founder of the Outside IR35 Roles website, which advertises currently available outside-IR35 roles on behalf of recruiters and end-hirers.

“In March 2022 we saw a drop off in public sector outside IR35 contracts advertised on the website of around 39% compared to the start of the calendar year. This then dropped further in April to 66% compared to the start of 2022,” he told Computer Weekly.

That said, he has noted a “bit of a spike” in outside IR35 roles being advertised within the past few weeks, which could hint at a sign the tide is turning.

This is a view shared by Seb Maley, CEO of IR35 compliance consultancy Qdos, who told Computer Weekly that – on the whole – public and private sector organisations are taking a more measured and pragmatic approach to complying with reforms now they have had some time to bed in.

“I don’t expect things to get worse, though, for contractors, regardless of the staggering bills issued in the public sector. In recent months – and based on our experience – the number of businesses taking a measured, fair and pragmatic approach to IR35 reform seems to be on the rise. 

“It’s vital that businesses see non-compliance in government departments as a reminder to prioritise their own IR35 compliance, rather than make needless knee-jerk reactions, like forcing all contractors to work [on a] Pay-As-You-Earn [basis].”

For Hughes, though, there is a genuine concern that medium-to-large private sector organisations – which were brought into scope of the IR35 reforms in April 2021 – will follow the lead of the public sector and also start dropping SME consultancies from their supply chains too.

“Over the next couple of decades and beyond we will see continued digital transformation, but this will hit the private sector now as well because of the change in rules taking effect there [in 2021] and what we will see is a real inhibition of the UK’s [potential] to be at the forefront of digital transformation, even though this is key to the UK maintaining its position in a lot of markets.”

Computer Weekly contacted HMRC for a comment on this story and to get its response to the claims that IR35 is having an unintended and detrimental impact on the UK government’s SME agenda, and received the following statement in response:

“The off-payroll reforms introduced in 2017 ensure that individuals who work like employees, but through their own limited company, are taxed like employees. HMRC consulted extensively on the reforms and delivered comprehensive education and support programme to help public sector bodies get things right,” the spokesperson said.

“The reforms raised an additional £525m in the first two years, levelling the playing field for workers and providing money that would not otherwise have been available for vital public services.

“The government spent a record £19bn with SMEs last year, the fourth consecutive annual increase. The new Procurement Bill will make it easier for SMEs bidding for government contracts, including those for digital services.”

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FIFA 23 lets you turn off commentary pointing out how bad you are

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FIFA 23 lets you turn off commentary pointing out how bad you are
A player shouldering the ball



(Image credit: EA)

FIFA 23 might be the best game soccer game yet for terrible sports fans, as it lets you turn off commentary that criticizes your bad playing.

Now that the early access FIFA 23 release time has passed, EA Play and Xbox Game Pass Ultimate subscribers can hop into the game ahead of its full release. But as Eurogamer (opens in new tab) spotted, they’ll find a peculiar option waiting for them.

FIFA 23 includes a toggle to turn off ‘Critical Commentary’. The setting lets you silence all negative in-match comments made about your technique, so you can protect your precious ego even when you miss an open goal or commit an obvious foul. The more positive commentary won’t be affected. 

Spare your feelings

A player dribbling the ball in FIFA 23

(Image credit: EA)

The feature looks tailored toward children and new players, who don’t want to have their confidence wrecked within mere minutes of picking up the controller. But even experienced players who just so happen to be terrible at the game might benefit.

It’s not perfect, though. According to Eurogamer, the feature didn’t seem to work during a FIFA Ultimate Team Division Rivals match, with critical comments slipping through the filter. Still, who hasn’t benefited from a light grilling every now and then?

Polite commentary isn’t the only new addition in FIFA 23. It’s the first game in the series to include women’s club football teams, and fancy overhauled animations that take advantage of the PS5 and Xbox Series X|S’s new-gen hardware. EA will be hoping to end on a high, as FIFA 23 will be the last of its soccer games to release with the official FIFA licence.

If disabling critical commentary doesn’t improve your soccer skills, maybe building a squad of Marvel superheroes will. Although you might not do much better with Ted Lasso wandering the pitch.

FIFA 23 is set to fully release this Friday, September 30.

Callum is TechRadar Gaming’s News Writer. You’ll find him whipping up stories about all the latest happenings in the gaming world, as well as penning the odd feature and review. Before coming to TechRadar, he wrote freelance for various sites, including Clash, The Telegraph, and Gamesindustry.biz, and worked as a Staff Writer at Wargamer. Strategy games and RPGs are his bread and butter, but he’ll eat anything that spins a captivating narrative. He also loves tabletop games, and will happily chew your ear off about TTRPGs and board games. 

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Google Pixel 7 price leak suggests Google is totally out of touch

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Google Pixel 7 price leak suggests Google is totally out of touch
The backs of the Pixel 7 and the Pixel 7 Pro



(Image credit: Google)

We’re starting to hear more and more Google Pixel 7 leaks, with the launch of the phone just a week away, but tech fans might be getting a lot of déjà vu, with the leaks all listing near-identical specs to what we heard about the Pixel 6 a year ago.

It sounds like the new phones – a successor to the Pixel 6 Pro is also expected – could be very similar to their 2021 predecessors. And a new price leak has suggested that the phones’ costs could be the same too, as a Twitter user spotted the Pixel 7 briefly listed on Amazon (before being promptly taken down, of course).

Google pixel 7 on Amazon US. $599.99.It is still showing up in search cache but the listing gives an error if you click on it. We have the B0 number to keep track of though!#teampixel pic.twitter.com/w5Z09D28YESeptember 27, 2022

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According to these listings, the Pixel 7 will cost $599 while the Pixel 7 Pro will cost $899, both of which are identical to the Pixel 6 and Pixel 6 Pro starting prices. The leak doesn’t include any other region prices, but in the UK the current models cost £599 and £849, while in Australia they went for AU$999 and AU$1,299.

So it sounds like Google is planning on retaining the same prices for its new phones as it sold the old ones for, a move which doesn’t make much sense.


Analysis: same price, new world

Google’s choice to keep the same price points is a little curious when you consider that the specs leaks suggest these phones are virtually unchanged from their predecessors. You’re buying year-old tech for the same price as before.

Do bear in mind that the price of tech generally lowers over time, so you can readily pick up a cheaper Pixel 6 or 6 Pro right now, and after the launch of the new ones, the older models will very likely get even cheaper.

But there’s another key factor to consider in the price: $599 might be the same number in 2022 as it was in 2021, but with the changing global climate, like wars and flailing currencies and cost of living crises, it’s a very different amount of money.

Some people just won’t be willing to shell out the amount this year, that they may have been able to last year. But this speaks to a wider issue in consumer tech.

Google isn’t the only tech company to completely neglect the challenging global climate when pricing its gadgets: Samsung is still releasing super-pricey folding phones, and the iPhone 14 is, for some incomprehensible reason, even pricier than the iPhone 13 in some regions. 

Too few brands are actually catering to the tough economic times many are facing right now, with companies increasing the price of their premium offerings to counter rising costs, instead of just designing more affordable alternatives to flagships.

These high and rising prices suggest that companies are totally out of touch with their buyers, and don’t understand the economic hardship troubling many.

We’ll have to reach a breaking point sooner or later, either with brands finally clueing into the fact that they need to release cheaper phones, or with customers voting with their wallets by sticking to second-hand or refurbished devices. But until then, you can buy the best cheap phones to show that cost is important to you.

Tom’s role in the TechRadar team is to specialize in phones and tablets, but he also takes on other tech like electric scooters, smartwatches, fitness, mobile gaming and more. He is based in London, UK.

He graduated in American Literature and Creative Writing from the University of East Anglia. Prior to working in TechRadar freelanced in tech, gaming and entertainment, and also spent many years working as a mixologist. Outside of TechRadar he works in film as a screenwriter, director and producer.

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DisplayMate awards the “Best Smartphone Display” title to the iPhone 14 Pro Max

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DisplayMate awards the “Best Smartphone Display” title to the iPhone 14 Pro Max

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