IR35 also known as ‘intermediaries legislation’, determines your employment status. Public sector workers will no longer be responsible for determining if they fall in or out of IR35 rules, this now falls to the agency, public sector employer or 3rd party that contracts an intermediary/limited company.
IR35 set out rules that effect your tax and National Insurance if you’re contracted to work for a client through an intermediary, such as;
• your own limited company
• a service or personal service company (PSC)
• a partnership
If you’re engaged by a client through your own intermediary, it’s the client’s responsibility to consider your employment status and make sure they meet their own tax and National Insurance liabilities.
There’s usually a contract between your intermediary and the client, either directly or through another party such as a staffing agency, a recruitment agency or an employment business.
If all of the following apply then you need to follow IR35 legislation:
• you work for a client as a self-employed contractor, sole trader, freelancer, or consultant
• you could be considered an employee if the intermediary didn’t exist
• you pay yourself through your own limited company or partnership (sometimes called an ‘intermediary’ or ‘personal service company’) or you have a material interest in that company
In 2015, the government performed a review of this legislation and consequently announced at Budget 2016 that the rules would be reformed in the public sector.
If you are paid through an intermediary, these new rules are designed to make sure that the right rate of tax and National Insurance is paid by you.
So, to give you some background on this...
The government have highlighted the need to ensure that public funds are correctly used and that those in receipt of them are paying the correct taxes under the off-payroll assurance processes introduced by HM Treasury in 2012.
The reform means that the public sector engager (in this instance, us the Agency, or public sector employer) will be responsible for applying the rules and liable for paying any associated tax and NICs to HMRC. Please note that for private sector clients, the PSC will still be responsible for applying the rules.
What happens now?
If you believe you may be affected by the changes which come into force on the 6th April 2017, we are here to help you. As your agency, we want to ensure the changes have limited impact on you and we are here to help and guide you in the right direction. Further information can be found by clicking here;
Further communication will be sent out directly if this new reform affects you. We’ll also keep you updated via bulletins on our website, so please keep checking. If you have any queries at this point, please feel free to contact us.