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Tagged In:  Tax

Welcome to our latest update on the upcoming IR35 changes that come into effect from 6 April 2017.



 
From discussions with our public sector clients, the majority so far have advised us they will be adopting a blanket ‘inside IR35’ policy, which is to be expected, based on the guidance provided by HMRC.
 
There has been some debate as to whether a client is categorised as public or private sector. We are currently taking advice on this matter and for any clients confirmed as private sector, they are expected to remain out of scope so IR35 status will be unchanged.
 
HMRC is producing a tool that will decide if contracts fall inside or outside of the IR35 legislation. Once the tool is made available, should you feel you fall outside of IR35, you need to speak to your line manager and complete an assessment with them using the tool to confirm your IR35 status.
 
We do recommend that you consider your options now as very few contractors within this sector will be deemed as outside of the IR35 legislation, however if you feel you will be outside, please email us including your name, job title and details of the client you work for.
 
Sanctuary Personnel will be unable to process anyone as outside of IR35 without receiving the results from the tool directly from the end client.
 
Some of our clients have stated they will not engage with contractors working through a Personal Service Company (PSC) after 5 April 2017. If you are operating as a PSC with one of those clients, we will contact you directly to discuss your options.
 
From 6 April 2017, Sanctuary will be offering contractors these options:

PAYE


  • Umbrella PSC – with deemed payments deducted at source

(Sanctuary is considering the most efficient and least disruptive way of implementing deemed payments. We expect to offer this option through a single 3rd party provider at a discounted rate for Sanctuary workers. These PSCs will still be able to use their own accountants, but using the 3rd party provider we appoint would be compulsory.)

  • PSC – confirmed as outside of IR35

At this stage, HMRC has not issued details of the technicalities around which tax code will be required for deemed payment deductions. Once this is released, we will communicate it to you.


IR35 Decision Flowchart

What to do now


You must now consider your options and take independent financial advice from an accountant. We have engaged Liquid Friday to offer a free consultation to all workers on our behalf.
 
Once you have decided which of the four options above you will choose, let us know by emailing us with your details and your chosen option.
 
We expect that new contracts will need to be issued for most contractors working through a PSC and we will look to arrange this as soon as possible.
 
Limited companies and umbrella services payments are inclusive of all employment costs (employers NI, WTR, employee tax and NI). Previously, the legislation required the PSC to deduct the appropriate sums accordingly, however the new legislation moves that responsibility of deducting employers NI, employers NI on holiday pay, employees tax and NI to the employment business who are now required to make the deduction before paying the PSC. Where an umbrella service is used, the umbrella service will remain responsible for making the appropriate deductions.

Choosing an umbrella service?


Sanctuary is currently reviewing its list of approved umbrella providers to provide a recommended list of companies that comply with UK legislation, UK tax and national insurance (NI) requirements.
 
We have noted that some umbrella services are currently offering a higher than average take home pay projection. To achieve this rate of take home pay, it is highly unlikely these schemes comply with UK legislation and tax requirements. If you are unsure, please contact us before signing up with those services.
 
Sanctuary will be unable to pay through any umbrella organisation that is based offshore (including the Isle of Mann) or any organisation offering loan or Employee Benefit Trust (EBT) schemes.
 
The results of our review of umbrella providers will be released in due course, however, we have already confirmed that Liquid Friday is a company that meets our compliance standards. Any Sanctuary contractor joining Liquid Friday in the next two weeks can secure 2 weeks’ service for free.



Sanctuary Personnel
February 2017



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