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Public sector contractors urged to invoice now

Public sector contractors urged to invoice now

One of the largest industry bodies relevant to the world of contracting –the Association of Independent Professionals and the Self Employed (IPSE) – has told contractors in the public sector to send invoices before 6 March and receive payment before 5 April.

The reason for doing so is down to the fact that from 6 April, payments could fall foul of punitive new tax rules.

Public sector organisations often use a Real Time Information system to pay employees. However, with the new rules for the public sector around IR35, these organisations are meant to assess a contractor’s IR35 status.

IPSE has found however that it seems many such organisations are either unwilling or unable to conduct such an IR35 assessment. The result in many cases will be that contractors will thereby be placed onto a Real Time Information system.

There is a risk that this will happen without a second thought or consideration for the original arrangement with the contractor.

This contractor will then be ‘on the payroll’. From 6 April, this would mean tax and National Insurance Contributions will be deducted at source. The result would be a significant loss of income for contractors.

Chris Bryce, IPSE chief executive, commented: “We have little faith in public sector organisations making an accurate determination of contractors’ IR35 status. Some aren’t even going to try. Instead they will put all contractors onto the payroll, without even considering whether this is the right arrangement.”

“That’s why it is critical that contractors are aware of the fast approaching deadline. All payments made after 6 April will be subject to the new legislation. This means that for many contractors, work done from 1 February is at risk. Any contractors which invoice one month in arrears, on 30 day payment terms, will need to get their invoices issued in the first week of March, or run the risk of falling foul of the new tax rules.”

“Any work completed during March but paid for after the 6th of April will be subject to the new rules – I’d recommend insisting on weekly or even daily payments if you can in order to minimise the losses you will suffer as a result of this ill thought out legislation.”

IPSE also warned public sector contractors that, retrospectively, the period before April 2017 could be investigated.

Bryce continued: “We asked HMRC to declare an amnesty on contracts which transit to the new tax arrangements in April. Unfortunately they refused and will not rule out retrospectively applying 2017 assessments to work done previously by the same contractors at the same client. For this reason we strongly recommend that, if you want to continue with a public sector client, you arrange for a completely new, properly worded contract to be in force from 6 April 2017. This should not merely be an extension of your current contract.”