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IR35 Changes 2 9.2.2017 .pdf



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IR35

Important information for
contractors working in the
Public Sector

CONTENTS
INTRODUCTION
01 What exactly is the government proposing?
02 How will these changes affect independent
professionals?
03 Is it just for Public Sector?
04 How are Public Sector bodies & agencies going to
determine the IR35 status of engagements?
05

Are the underlying factors which determine IR35
status changing?

06 Can the decision be appealed?
07 When does the government want these new rules to
come into practice?
08 How will VAT be affected?
WHAT SHOULD YOU DO NEXT?

INTRODUCTION

Imminent IR35 Changes
The imminent HMRC changes
to IR35 will impact those
freelancers working within the
Public Sector.

This booklet is designed to
answer the most pressing
questions, as they stand at
the current time.

Due to the position Gravitas
holds within the industry, we
have been working diligently
behind the scenes with
organisations
such
as
APSCO, HMRC and other
parties, to gather as much
information
as
possible
regarding the changes.

With many questions still left
unanswered
by
the
government, some of the
information contained herein
could well change as the
April deadline moves nearer.
We will produce further
updates as necessary.

If you have any questions about IR35 then please contact our contractor
care team: contractors@gravitasrecruitmentgroup.com
01

01
What exactly is the
government
proposing?
The consultation document
puts forward a set of
proposals that will change
the way IR35 works for
public sector engagements.
In essence the government
wants public sector
organisations to determine
the IR35 status of
engagements. Then taxes
need to be applied as they
would be for employees, by
the fee payer, through the
RTI (Real Time Information)
system.
Page 6 of the legislation
provides us with a summary
(extract opposite]

‘This means that where an
individual provides services to a
public sector engager through a
PSC and is doing a similar job in
a similar manner to an employee,
both they and their engager will
be required to pay broadly the
same tax and National Insurance
as if they were an employee. This
will be the case whether the
individual is engaged directly or
through a third party such as a
recruitment agency. Taxes will be
reported through the Real Time
Information system, and paid
using
HMRC’s
accounting
procedures which public sector
organisations and agencies will
already be using for any
individuals they employ directly’.

More information:
Off-payroll working in the public sector: reform of the intermediaries
legislation Public Consultation Document

02

How will these
changes affect
independent
professionals?

Gravitas is concerned that
by transferring liability to pay
the correct employment
taxes from the worker’s own
company to the public sector
body or agency a number of
problems will be created.
Independent professionals
may be deterred from
working in the public sector,
while organisations will be
less likely to 'risk' engaging
contractors, damaging their
ability to deliver vital
projects.
Furthermore, these
proposals blur the boundary
between employment rights
and tax status.

03

Is this just for the
Public Sector?
Yes – for now. The
consultation document makes
clear the rules in the private
sector will remain unchanged.
However, there are inevitably
concerns that if this measure
can be “successfully” brought
in to the public sector, further
down the line the government
will seek to apply it to the
private sector too.
What Constitutes Public
Sector?

Any organisation that is
legally required to respond to
Freedom of Information (FOI)
requests. Examples given are
on page 12 of the Payroll
Working in the Public Sector:
reform of the intermediaries
legislations Public
Consultation Document

'Government departments,
executive agencies and nondepartmental public bodies
NHS
Police and fire authorities
Local authorities
Devolved administrations
Educational establishments
including universities
BBC, Channel 4
Bank of England
An extensive list of
organisations covered by the
FOI legislation is included in
the Annex (p.47).'

04

How are public sector
bodies going to
determine the IR35 status
of engagements?

HMRC is going to develop an
online tool to determine
status.
The IR35 Forum, made up of
industry leading suppliers is
already being consulted on
the development of this
tool. As part of the forum
Gravitas have volunteered
resources to help test it.
When is the public sector
body responsible and when
is the agency?

In all cases the public sector
body is responsible for
indicating status.

05

Are the underlying
factors which
determine IR35
status changing?

No. IR35 status will still be
determined using the same
tests e.g. right of substitution,
SDC (supervision, direction
and control), MOO (Mutuality
of Obligation) etc.
Many had thought HMRC
would seek to streamline the
test to make it just about
SDC, but at the moment it
doesn't look like this is
happening (see opposite)
The only thing that’s changing
is, that in the public sector
only, the responsibility for
determining whether IR35
applies is moving from the
contractor/PSC to the public
sector body and that taxes
need to be applied as they
would be for employees, by
the fee payer.

‘The basis on which the rules
are applied to determine
whether a worker would have
been an employee if engaged
directly is not changing. This
is the case for engagements
with both private and public
sector clients’. (page 11)

06

Can the decision be
appealed?

Yes. Page 29 states:
‘There will be a statutory right to appeal against the tax and
National Insurance liability.
Where a PSC or an engager disagree with a determination
that the new rules apply, the PSC and/or engager will be able
to request a formal review of the decision and to appeal that
decision to the tribunal in the same way as other Pay As You
Earn and National Insurance decisions and determinations.'
This has big implications. If the new rules are brought in and used to
unfairly determine status, it can be challenged at tribunal.
If successful it would undermine the tool and the rules, so there is
some pressure on the government to make the tool robust in the
face of appeals, which will be challenging.

Off-payroll working in the public sector: reform of the
intermediaries legislation Public Consultation Document


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