As you may be aware there are a number of changes coming into play from April 2017 that will impact contractors. If you work in the public sector, you will likely no longer have a say in your IR35 status.
Instead it will be up to your client or agency to determine this for you! and then before you are paid employment taxes will be deducted first, so your Limited company will only receive the net payment.
The story so far…
How will the public sector decide your IR35 status?
One of the main concerns will be ‘who’ is it that makes the decision. Will it perhaps be someone in the public sector that works alongside the contractors and knows more about their working relationship, or will it be a centralised decision made from the top that everyone that works in that department is caught?
Some of the public sector bodies already had some of these systems in place beforehand. For example, some clients working in the NHS or MOJ have previously had questionnaires to complete to determine their status or they’ve had to provide evidence an IR35 review has been undertaken by an external provider. It this is now going to move online with a new online test to be completed by the public sector client or agency.
Having had experience of HMRC’s previous online tools which were always biased towards workers being caught by IR35, it will be interesting to see what they release this time! (it’s expected to be made available by the end of February 2017). IR35 is not as easy as a series of simple ‘yes/no’ answers but as it will be on the public sector client to determine the status or the liability falls on them, it will be hard for them not to use what is made available.
What should you do right now?
You need to bear in mind that this applies to all payments received after 6 April 2017. Therefore you need to make sure where possible, you get all payments for March 2017 paid prior to 6 April 2017. This will help you avoid any PAYE being deducted at source, if you are deemed to be caught by IR35 afterwards.
Plus, if you want to look at trying to protect yourself from HMRC retrospectively trying to collect further taxes, we’d suggest you look to have a fresh new contract from April 2017 onwards (not an extension of your current contract).
If you do work in the public sector, you need to start speaking to your client or agency now about how they will determine your status, making sure you are paid before the new tax year, familiarise yourself with expense claim changes and what exactly your agency will need before they make any deductions.
How can Aardvark Accounting help you?
If you are contracting in the public sector, it’s likely these changes are going to impact you. So, give us a call and we can run through your options. Whether this is to challenge the decision, help negotiate a higher day rate or proceed on the basis you are caught but understand about the changes this means for your company.
Let’s talk… we’re all ears!