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IR35 Tax Update - 8 Feb 2017


Tagged In:  Social Work, Social Worker, Tax

This update highlights the latest information around IR35 so that you can seek further advice from a qualified accountant or financial advisor and then decide the most suitable way forward for you, based on your individual circumstances.




Background


Important changes are coming that affect all contractors working through Personal Service Companies (PSCs) within the public sector.
 
Currently, IR35 rules state each contractor is responsible for their own tax and National Insurance contributions and deciding if their contract falls inside or outside IR35. The changes, which come into force for all payments made to PSCs after 6 April 2017, will mean this responsibility transfers to the organisation, agency or third party engaging with the PSC, regardless of when the contract commenced.

What this means for you


From discussions with our public sector clients, they have told us they expect all contracts will be falling inside of IR35. That means the organisation, agency or third party will be required to collect the correct amount of tax, employee’s NI and employers’ NI at source.

If your current assignment falls within IR35, tax and NI deductions will be made before your PSC receives payment.

As the legislation is still currently in draft form, the exact percentage of deductions is unknown at this stage.

Read the HMRC's latest guidance on IR35.

What should you do?


We suggest you seek the advice of a financial advisor or qualified accountant. They will be able to provide you with a personal detailed breakdown of how this is likely to affect you and help you choose the best way forward when the changes come into force.

Sanctuary has engaged Liquid Friday to assist all Sanctuary contractors with IR35 by providing free advice from their team of experts. See below for details.



This is an illustration only and should not be used for any official purposes. These calculations are based on the pay rates above and 40 hours per week.
 
For the public sector caught income, the deemed payment has AL, NIC and PAYE deducted. The PSC take home amounts exclude any costs that are incurred running the PSC and assumes the company is not registered for VAT. 
 
For the Umbrella calculations, the illustration assumes that the contract is subject to supervision, direction or control and no temporary workplace expenses are available (i.e. no travel and subsistence). It assumes the contractor is aged above 25, opted into the company pension scheme and holiday pay is issued on an advance basis. The umbrella calculations include home office expenses, average P87 expenses which are claimable at the end of each assignment and 
 
The table ignores any additional income you may have outside this illustration. The table is based on draft legislation and how it is anticipated that it will be enacted. When the legislation is finalised, this could change.
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