Public Sector IR35 Changes April 2017

From April 2017, Contractors working on Public sector contracts are no longer responsible for determining their own IR35 status. The Public sector engager/end client will have to determine the IR35 status of a particular contract. If the contract is assessed to be inside IR35, the entity which pays the contractor’s limited company (most likely to be either the public sector body or a recruitment agency) will become responsible for deducting the resulting tax from payments made to the limited company and reporting these deductions through their own RTI processes.

The legislation also confirms that the “deemed salary” calculation to be applied will no longer give a 5% allowance for company running costs for Public sector workers.

So, if you are a contractor working on an assignment for a public sector client, from April 2017 you may see PAYE tax being withheld from the payments made to your company if your end client believes that you are caught by IR35. This doesn’t mean that you are no longer able to contract through a limited company but your take home pay may be affected if your public sector client or agency believes you are working on an assignment caught by IR35.

There are still many unanswered questions and much to be clarified. OrangeGenie Accountancy and many others in the industry have raised significant issues:-

  • Clear definitions of what a public sector client is
  • Can an IR35 status determination be challenged? If so how?
  • How will PAYE (which is a personal tax) be withheld on payments made to a limited company and how will recognition be given to avoid double taxation
  • Do the Public sector bodies have enough knowledge to be able to make the IR35 decision?
  • Will the Digital tool, supposed to be helpful for end clients, actually be fit for purpose?

How much you will be affected by these changes will depend on the answers to the above and on the risk profile of your end client, the Public sector body. Some Public sector bodies may take the view that all assignments are inside IR35 and therefore withhold PAYE from all contractors. This would be an extreme risk adverse approach but relatively simple to administer. The problem with this approach is that the end client may find they lose or have problems attracting the skillset and experience they need. Other end clients, Public sector bodies may choose to fully consider the IR35 position to ensure their contractors continue to be paid in the correct way.

We will continue to monitor all progress with this legislation and will work with all new guidance and instruction that is issued. We are working closely with Recruitment Agency partners to ensure we can still provide the best solutions for our contractors. We are asking all of our Public sector clients to answer a short survey and to discuss their situation with their accountant. We would encourage any contractors working through a limited company with a public sector assignment to obtain an up to date IR35 opinion to enable them to consider their options post April 2017.

Contractors working in the private sector will not see any changes to the current IR35 regime.

To find out more about the changes please call us on 01296 468 185 or email accountancy@orangegenie.com .

Why Orange Genie Accountancy?

Orange Genie Accountancy offers fixed fee accountancy packages to contractors and freelancers. Each client has unlimited access to their own dedicated approachable and friendly accountant. All Orange Genie Accountancy accountants are specialists in the contracting market, so they can give you bespoke, high quality advice.

We will always keep you informed about anything that could affect you and your company. Our relationships with our clients are extremely important to us so we'll be in touch often, whether it be face to face, over the telephone or email.

Our packages start at £75 + VAT a month for an online service. Our most popular package is £120 + VAT a month which provides you with your very own dedicated accountant as well as:

  • Unlimited accountancy support
  • Face to face meetings so we can get to know you and understand your contracting goals
  • Proactive contact
  • Director and employee payroll
  • Annual Return
  • Self-Assessment Return
  • A fully compliant service so you are safe in the knowledge that you are meeting your legal obligations
  • Access to the Freeagent Software, which is updated in real time so you can always see how your business finances are looking

​And much more, includingaccess to wealth management advice, IR35 reviews and pensions planning. 

If you would like to appoint Orange Genie Accountancy as your accountants please either fill out our enquiry form or give one of our friendly expert accountants a call on 01296 468 185 or email accountancy@orangegenie.com

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