The IR35 reforms in the public sector will take effect from 6th April 2017, but what do they mean for you? The following article answers key questions regarding the IR35 reforms.
What Will it Mean to Be ‘Inside’ or ‘Caught by’ IR35?
Being ‘inside’ or ‘caught by’ IR35 means to be a “disguised employee” on your assignment i.e. you are effectively an employee of the client when considering certain indicators. From 6th April 2017, if your assignment is inside IR35, then full employment tax and National Insurance Contributions (NICs) will be deducted from the payments your limited company receives from that assignment.
Who Decides Whether your Assignment is Caught by IR35?
From 6th April 2017 the responsibility for determining the IR35 status of public sector assignments will fall to the body which pays the contractor, and any associated liability would also fall to them. The ‘fee payer’ will be required to make the employment tax and NICs deductions from payments of any assignments caught by IR35.
The fee payer may not necessarily be the public body itself, but they will still be obliged to determine the IR35 status, and then inform the intermediary which they engage with in the contractual chain – this will most often be your recruitment agency.
Will Your Previous Contracts be Affected?
There is a risk that if your assignment is caught by IR35 when it was previously not, then your entire history of public sector assignments will be probed under IR35. Due to this risk, IPSE has urged that if you want to continue with the same public sector client from 6th April 2017, then you should arrange for a completely new, properly worded contract to be effective from this date. The same would apply to all future public sector assignments. ICS would recommend, in fact, that public sector assignments be paid via an Umbrella Solution. Further details are provided below.
Did You Know… There are Options Available That Offer More Flexibility than PAYE?
As there will be no financial benefit to operating via a limited company to those inside IR35, the most flexible option is an Umbrella Solution. ICS Umbrella offers a number of benefits:
• Tax relief available for all allowable expenses
• Employment by ICS Umbrella meaning full employment rights, and no associated director’s responsibilities or administration
• No IR35 assessment on assignment
For those on short term public sector assignments, ICS Accounting can undertake existing accountancy duties for your limited company whilst you are working via ICS Umbrella.
Did You Know… You Can Claim Site to Site Mileage From Your Main Place of Work?
You will be able to claim site to site mileage from your main place of work, although this does not include commuting from home to your main place of work – only those not subject to the right of Supervision, Direction or Control can claim this.
Did You Know… It Takes 3 Months to Close a Limited Company?
Closing your limited company will take on average 3 months, but ICS Accounting can take on the role of your accountant – completing all remaining statutory filing requirements, deregistering your company for all services where necessary and seeing your company through to dissolution. Or we can arrange for your limited company to be closed via a Members’ Voluntary Liquidation, which, if the retained profit within the company is over £25,000, provides the benefit of the remaining balance being able to be withdrawn at a reduced rate of tax.
If you are working in the public sector and would like to know more about what these changes will mean for you or to discuss the appropriate solution for you, please contact us.