How could they affect your earnings if you work for public-sector clients?

1. IR35 rules seek to ensure fairness…

According to HMRC: “The off-payroll rules (known as IR35) ensure that individuals who work through their own company pay employment taxes in a similar way to employees, where they would be employed were it not for the personal service company or other intermediary”.

 

 2. A significant change has happened…

From 6 April 2017, all public-sector organisations will be responsible for determining the employment status of all “off-payroll” workers – including contractors and freelances – engaged through “intermediaries” such as PSCs (ie personal service companies) and third-party agencies.

According to HMRC: “Use of intermediaries [could]: reduce or avoid an individual worker’s personal tax/NICs liability; and reduce or avoid liability to employer’s NICs,” which is why IR35 legislation was originally introduced.

 

3. You’re not affected if you work for private sector clients…

The changes to IR35 responsibilities can only apply where personal services are provided to a public-sector organisations. (source: Gov.uk).

 

4. You can find out HMRC’s view on your employment status…

HMRC has created an Employment Status Service tool, which enables contractors, agencies and public-sector organisations to answer questions online to find out HMRC’s view on a worker’s employment status for the purposes of IR35.

 

5. From 6 April 2017, tax and NICs could be deducted directly from your fees…

If the public-sector organisation decides a contractor is caught by IR35. Typically the entity which pays your company is responsible for operating these deductions.

 

6. You may still have to pay other costs…

Despite having PAYE and NICs deducted from payments received, there may still be costs for operating the intermediary.

 

7. Deductions may be made on work you’ve already done…

The new rules must be considered for all payments on or after 6 April 2017, even if work was completed before 6 April 2017.

 

8. Some public-sector customers may seek to reduce your fees…

Because the public-sector organisation could have to pay secondary NICs for contractors and freelances caught by the new IR35 changes, some might seek to negotiate lower fees to cover these costs, which could affect the amount you receive.

 

9. You may be able to appeal unfair decisions…

If you believe your public-sector client has wrongly judged you to be caught by the IR35 changes, in the first instance, speak to them about it. If they won’t change their decision, contact HMRC to request a review.

You can email HMRC [ir35@hmrc.gov.uk] with your IR35 enquiries or call HMRC on 0300 123 2326 (Monday to Friday, 8.30am to 4.30pm).

HMRC has published guidance to the IR35 changes here.

 

We can help you…

Determining employment status for IR35 purposes isn’t always straightforward, while some organisations might “play safe” by deducting income tax and NICs in most cases, even for those who are genuinely in business on their own account and therefore self-employed rather than a “disguised employee”.

 

Our experts can support you and provide tailored professional advice, to find out how KPMG Small Business Accounting could help free up your time so you can concentrate on your role, request a callback for a quote today.

 

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