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Do the Changes to IR35 effect You?

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Mike Kelly Highways and Traffic, Defence, Construction Management...

Are you a PSC/Ltd Company contractor working in the public sector?


If you are; then you need to be aware of the possible changes to your status under IR35.

Whilst the impending changes to the Intermediaries Legislation have been widely reported; many Contractors working on assignments with Public Sector bodies are still unaware of the impact these changes will have on them.

The Chancellors Autumn Statement; finally confirmed, that the changes to the Intermediaries Legislation; will come into effect as of the 6th April 2017.

These changes will affect all those Contractors/Workers engaged on contracts via; PSC/Ltd Companies engaged on assignments within the Public Sector, on the 6th April 2017 and all payments made on or after this date.
 

The changes in summary

The revised IR35 legislation for PSC/Limited contractors on assignments with Public Sector clients; moves the responsibility of assessing the IR35 status, away from you the PSC/Limited contractor to the ‘end-client’ (The Public-Sector Body).

Should, following this assessment this assignment be considered in-scope of IR35 then the responsibility for the deducting tax, NIC’s and completing the RTI (Real Time Information) moves from Contractor and rests with the ‘Engager’ (The Client/Agency/Umbrella Company).
 

Will this affect you?

If your contract is with an end user hirer who Is a Public-Sector Body; then from the 6th April 2017; it will no longer be your decision as to whether your assisgment is In or Out of scope for IR35. This decision will be the responsibility of the Public-Sector Body.

So should the Public-Sector Body you are engaged with determine that your assignment is subject to IR35, then as of the 6th April; your limited company will only receive payment of Invoices which are net of PAYE (Tax and Employees and Employers NI).

IE. Payments made to your PSC/Ltd Company excluding VAT: will have to be treated as Employed Income.  

 

Which engagements will the new rules apply to?

The new rules will apply where:

•             an individual personally provides services, or is under an obligation to personally provide services;
•             through an intermediary;
•             to a public authority;

and

the individual either holds a “material interest” in the personal service company i.e. more than 5% of shares or, in the case of a partnership, is entitled to 60% or more of the profits of the partnership or in the case of an individual, payment can reasonably be taken to be for the individual’s services.
 

What are your options after the 6th April?

1.            Continue working via your PSC/Ltd Company and be paid net of TAX and NI. "Deemed Income"
2.            Work via a compliant Umbrella Company.
3.            Be engaged on a temporary PAYE contract 


What will be the best option for you?

This will depends on a number of factors; 

If your assignment is only short-term and you intend to move onto a Private Sector Contract in the short-term then Option 1, might be best.

If your contract is likely to be long-term and you work mainly on Public Sector projects, then Option 2 or 3 might be best.
 

Working via an umbrella company

This is a recognized and compliant method working on temporary assignments.
A large percentage of Engineering and Construction professionals; are already engaged on contracts in this way.
Working via an umbrella company is a tax efficient method of working and provides attractive levels of retention; after deductions.