Ahead of the upcoming, much-maligned reforms around contractors and personal service companies working in the public sector, HMRC has issued four advisory documents intended to help support those who will be affected.
From 6 April, as has been widely publicised, the client or agency will deduct tax from a contractors fees. The extra burden this will place on public sector organisations will likely see many choose to move these contractors to the main payroll, thus negating many of the benefits of contracting.
With the April deadline not so very far away, the documents cover the variety of people who will be affected – from contractors and PSCs to the public authority themselves
One document is aimed at personal service companies and opens with ‘What to do if you’re paid through a company you own, for work done in the public sector.’
This document does have an example of invoicing a client where an agency is the fee-payer, but fails to touch upon vital elements such as the three current responsibilities of the personal service company.
The second document outlines a number of important details for fee payers, and clarifies that once the changes kick in, the fee payer must deduct the associated Income Tax and NICs from the employee’s salary and pay them to HMRC. The document also lists the responsibilities of the PSC, as well as an agency, third party or public authority.
The third document is divided into two chapters, and is aimed at public authority, agency or other third party affected by the IR35 reforms. This document points out the requirement of making tax deductions for workers, and provides advice for when a new worker starts, and around worker IDs and the apprenticeship levy.
The fourth and final document presents itself as ‘steps for public authorities to consider when engaging with a personal service company’. This document provides information for end-users and how to best engage with PSCs directly and indirectly. There is also a clear indication that they should save their records in order to support any decision where a worker is deemed outside IR35.
While there is some overlap in the documents, they do provide a clear insight into the ins and outs of the IR35 reforms in the public sector. Whether they will help simplify the process for those paying fees within the public sector, and potentially allow more contractors to work in it, remains to be seen.
The four documents can be viewed here:
Should you want some peace of mind, we offer a full contract review amongst other services to help you prepare for IR35. We’ll give a pass or fail based on the current contract you hold, along with comprehensive comments on how to improve any problem areas.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news and contractor guides.