Latest Article: IR35 Public Sector Changes – Intermediate Agencies and Contractors face challenges in the 2017 Budget
Posted by: Matt on Sep 26, 2016
By Fraser Hodgkiss
In the last budget, it was announced that HMRC now expects Public Sector Bodies (PSB’s) to ensure that Contractors pay enough tax.
Responsibility for assessing if a contractor or partnership is working inside or outside of IR35 will be with the Public Sector Body (PSB) and not the Contractor/Partnership. If identified as working within IR35, the contractor will have to be included in the client employee payroll, and pay Tax and National Insurance Contributions.
This represents an interesting change in tax responsibility, at the moment it’s the Contractor or Partnerships responsibility to determine if the Personal Service Company (PSC) is working inside or outside of IR35.
So what does this mean for Agencies and Partnerships?
If the new Employment Status Indicator test is positive then PSC’s invoices will have to be processed by both Accounts Payable and also Payroll departments.
The contractor could have to be added to the payroll and deduct tax and national insurance and also deduct 5% from invoices fees (excluding materials).
Additional Software and extra administration will cost more and take additional time to process. There may also be other employee rights to consider too including Auto Enrolment which means that they will have to have their employee contributions deducted from their invoices, then refunded if they opt out.
Lots to consider, and although clarification and details on certain points are still needed, these changes will have a serious impact on Contractors and the Agencies that they work through.
No doubt many Contractors, Agencies and end clients will be utterly confused by this new regime. We are here to help and we can help to assess the likely impact on all parties, then make viable suggestions to help everyone remain compliant but as efficient as possible.
You can contact us using firstname.lastname@example.org or on the phone using 02076143100.
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