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




Statement from HMRC


“The measure, “off-payroll working in the public sector” moves responsibility for deciding if the off-payroll rules for engagements in the public sector apply from an individual worker’s intermediary to the public authority, agency, or third party paying the intermediary. The measure makes that public authority, agency, or third party responsible for deducting and paying associated employment taxes and National Insurance contributions (NICs) to HM Revenue and Customs (HMRC).” Full statement
 
This means that if you work for the public sector, you can no longer determine for yourself whether your assignment is inside or outside of the IR35 legislation for tax purposes. Instead the end client makes the determination and legally the entity that pays you must comply with that decision.
 
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.
 
If you feel that your assignment does fall outside of IR35, then you will need to speak to your line manager or client nominated IR35 liaison officer, if applicable, to go through the HMRC test with them. If the results conclude your assignment is outside IR35, then Sanctuary will require the client copy of the tool, including responses with the contractors name on, signed by the client and sent directly from the client to Email us.

Sanctuary is only allowed to pay workers in a compliant way, this means:
  • We are unable to accept tools or certificates that are not from HMRC
  • We are unable to determine or influence IR35 status
  • We are unable to pay contractors as outside of IR35 without a copy of the tool, including responses, signed and directly from the client

There are some clients that could be categorised as public or private sector. We are currently taking advice on this matter and for any clients confirmed as within the private sector, they are expected to remain out of scope, so the payment method will remain unchanged and it will continue to be your responsibility to determine IR35 Status.

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.
Sanctuary processing of PSCs where contracts are determined as inside IR35 after the 6th April:
  • Sanctuary have considered the options and have decided that the most efficient way for contractors to be paid after 6th April is via a third party. With that in mind, Sanctuary has engaged Freedom Friday, a part of Liquid Friday to calculate gross payments, deemed payment deductions and process allowable expenses.
What does this mean?
  • PSCs will need to sign up with Freedom Friday
  • New contracts will be issued
  • Limited company gross pay rates will become gross assignment rates (and includes reimbursements for all the amounts deducted below, the gross assignment rate is the same as our umbrella rate, both of which have been uplifted from our internally PAYE rates to cover all deductions below)
  • Freedom Friday will make deductions for ERNI, Apprenticeship Levy and their fee from your gross assignment rate. This gives your gross pay
  • Freedom Friday will then calculate deemed payments for NI & PAYE tax taking into account any allowable(tax deductible) expenses
  • Freedom Friday will Pay your deemed payment into your company bank account
  • Freedom Friday will pay the deductions over to HMRC via an RTI and send a copy to Sanctuary for audit purposes
  • The margin for the Freedom Friday service is normally £10 per week, payable by the PSC. This has been discounted for Sanctuary contractors by 50% to £5 per week
Signing up to Freedom Friday is compulsory if you wish to remain being paid via a PSC and your contract is inside IR35.
 
For audit and administration purposes, Sanctuary will not be working with any other secondary companies to process deemed payments.
 
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.

Sanctuary will be offering contractors these alternative options:
  • PSC (inside IR35) deemed payments as detailed above
  • PAYE
  • PSC – confirmed as outside of IR35/Out of scope
  • Umbrella

For audit and compliance purposes, Sanctuary has decided to only allow set up with new umbrella services who are full members of the Freelancer & Contractor Services Association (FCSA). The list of approved umbrellas can be found here.

Sanctuary will no longer set up new umbrella payment details with anyone that isn’t on this list.

Sanctuary has negotiated with Liquid Friday for them to offer the first 4 weeks of umbrella service for free.

What to do now

  • Once you have decided which of the options above you will choose, let us know by clicking on the appropriate button below. This will enable us to ensure that we are working with you in the best way to ensure that you are paid after the 6th April.
  • Sanctuary will be processing an extra payroll for all PSCs on Monday 3rd April to give a last chance for payment before the 6 April
  • Timesheets must be approved by 11am on Monday 3rd April
  • If you have outstanding timesheets from weeks prior to week ending 2nd April, then please get them on the systems and ensure they’re approved asap. The new rules apply to all payments made after 6th April regardless of which weekending they are for.

Sanctuary will not be able to process any payments to PSCs after the 6th April if one of the above options hasn’t been chosen.

Please click the link below to choose your payment option:




If you have any queries, please contact us on Email us or via your consultant.
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Chris Horne, 27 May 2017, 10:14 AM
Hi, are Sanctuary Social Care and Liquid Friday the same organisation
Andrew Pirie, 30 May 2017, 03:56 PM
Hi Chris, Liquid Friday is a separate organisation to Sanctuary. Sanctuary engaged them to provide some free consultancy to contractors earlier this year around the IR35 changes and negotiated an offer of 4 weeks free for anybody that chose to use their services.
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