Off Payroll working in the Public Sector
Posted on 1st Mar, 2017 |
In the Autumn Statement 2016 the government confirmed that it was going to reform the intermediaries’ legislation often known as IR35. The intermediaries’ legislation ensures 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 companies. These new reforms come into effect on 6th April 2017.
The reforms will affect individuals working through a Personal Service Company (PSC) in the Public Sector or those who may consider this in the future. In relation to these reforms Public Sector is defined as an organisation subject to the Freedom of Information Act.
The new legislation:
- Moves the responsibility for determining if an assignment is Inside IR35 to the end client (e.g the public sector body)
- Moves the responsibility for deducting tax and National Insurance Contributions to the Payer (usually the agency)
Since the end of January 2017 we have sought advice from professional consultants and there are 3 main options for contractors in the event that their PSC assignment falls inside IR35:
- PSC – You remain as a PSC however your pay will be subject to PAYE and NIC1 deductions. This also means that your hourly/daily pay rate is likely to be reduced
because the agency now has to account for employer’s NIC. HMRC have requested that all PSC workers inside IR35 are to be paid via Real Time Information
- PAYE – You may decide to transfer to a PAYE temporary employee with Essential Employment.
Employment which would come with benefits such as employment rights and holiday pay. However this means that your hourly/daily pay rate is likely to be reduced because the agency now has to account for employer’s NIC, WTR, Statutory Sick Pay and Pensions. Your pay will then be subject to the Employee’s NIC and income tax.
- Umbrella – We can put you in touch with a number of Umbrella Company providers,who we have vetted and would be responsible for administering PAYE income tax and NICs deductions, as well as providing benefits such as employment rights and
holiday pay. However this means that your hourly/daily pay rate is likely to be reduced because the Umbrella Company now has to account for employer’s NIC, WTR, Statutory Sick Pay and Pensions.
We would recommend to any of our Public Sector contractors who operate their own PSC to seek independent financial advice.
If you would like to speak to one of our recruitment consultants for further information and if you are worried that your assignment is in scope of this new legislation then please call us on 0330 335 3333.