Last Monday saw the release of the HMRC’s draft finance bill, detailing the reforms as to how the IR35 legislation must be operated in the public sector from April 2017.
There have been strong reactions from industry bodies to the Government’s new ‘Draft provisions for Finance Bill 2017’, nearly 400 pages of new tax legislation setting out the draft provisions for technical consultation, including changes to National Insurance contributions, clampdown on salary sacrifice contracts for new car schemes, and simplification of PAYE Settlement Agreements.
While the draft reveals that measures will be taken to ensure workers within the public sector that fall inside of IR35 and therefore without transferable skills will not be able to operate through their own PSC/Limited Company. Yet again it highlights the importance of a strong and compliant outsourced payroll service which provides a PAYE regime to our countries flexible contract and freelance workers. The public sector is first to be affected as from April 2017 and it is strongly rumored the private sector will follow in April 2018.
What does this actually mean to the public sector?
In simple terms, all contract workers within the public sector who fall within the ‘off-payroll’ model, will need to be either employed internally with the agency on their PAYE, or for them to utilise a traditional outsourced PAYE service. Providers like ePayMe, who can accommodate both FEP [Fixed Expense Pot] or Non Expensed PAYE Net pay services will be most favorable to both the agency and the contract worker.
A couple of key factors to consider for your workers:
- Flat Rate VAT schemes are subject to an increase from 14.5% to 16.5% in April 2017 which will result in a loss to the workers utilising a PSC or similar model.
- Incorrectly claimed VAT can be retrospectively reclaimed from HM Revenue & Customs from the date of incorporation [in many cases, this could be thousands of pounds]
- No transferable skills will result in the worker being deemed ‘inside’ of IR35.
- The new government lead IR35 Digital Tool will rule all public sector workers as ‘inside’ of IR35.
- HM Revenue & Customs will reserve the right to invoke the Debt Transfer ruling to seek unpaid taxes from you the agency, or the end client hirer.
Did you know?
Since March 2016 and August 2016, over 48,000 public sector contractors incorporated their own PSC/Limited Companies.
Sadly, the rogue PSC or equivalent model providers have caused an unnecessary shift following the April 2016 financial statement changes surrounding T&S by operating a different flavor of Tax avoidance.
If you think you may be left with fingers pointing at you come April 2017, or simply wish to discuss how the changes could, or indeed will affect your business and your invaluable work-force. Please do not hesitate to contact us, either by calling us on 01252 863700 or email sales@epayme.co.uk