IR35 status is more important than ever – especially if you work in the public sector

IR35 status is more important than ever – especially if you work in the public sector

Oct 05, 2017

If you’re a contractor in the public sector, you’ll be aware that changes were introduced in April this year which potentially affected your IR35 status.

Now that the new rules have been in force for a few months, it’s interesting to note that the impact may be less severe than originally thought. The NHS, in particular, appears to be considering each case on its own merit, rather than assuming that every PSC would be caught by IR35.

IR35 status affects your tax and National Insurance, so it can have a significant impact on your take-home pay.

The rules can be confusing and there are severe penalties for non-compliance. Our team of specialist contractor accountants has the knowledge and experience of IR35 to help guide you through the issues.

What is IR35?

IR35 status affects how much tax and National Insurance you pay if you contract through your own limited company or an employment agency. If you are subject to IR35 then the limited company or employment agency has to deduct PAYE and National Insurance Contributions (NICs) at source. In a nutshell, this means a higher tax bill and less take-home pay.

How do you know if IR35 applies?

IR35 status is determined by the level of autonomy you have over the way in which you work.

Before starting each contract, you need to ask yourself:

  • Do you have a free hand to decide how the work is carried out?
  • Do you have to carry out the work yourself or can you send a suitably qualified employee or a subcontractor to do the work?
  • Are you free to decline work from this client if you choose to do so?

If the answer is ‘no’, then your role could be subject to IR35.

If you are a contractor in the public sector then you need to know about new rules which came into force on April 1st 2017. The new rules led many NHS organisations to assume that every contract commissioned via a PSC would be caught by IR35. This stance has now been amended so that each individual case is assessed on its own merits.

Your options

You will need to consider IR35 rules before taking on any new contract or assignment. We offer our clients regular IR35 reviews free of charge and encourage them to get in touch at any time to discuss new contract opportunities and whether IR35 would apply.

If IR35 does apply, you have a number of options including.

  • Declining the contract and seek work which is not subject to IR35.
  • Exploring whether it’s possible to work as an employee rather than a contractor. While you would pay tax and NICs as an employee, the benefit would be that you would be entitled to the rights and protections of an employee.
  • Opting to join an umbrella company like Umbrella Plus which is operated by Crest Plus. You would, in effect, become an employee of Crest Plus but you would be able to work for a number of organisations while enjoying employee benefits such as holiday pay, sick pay and ‘continuous employment’ which is helpful when securing mortgages and other loans.

Further reading:

Read our detailed guidance on IR35 or our blog post which explains how to work out if your role is subject to IR35.

For further information or advice about any aspect of IR35, please get in touch on 01244 684700.

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