IR35 Off Payroll Event

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• Operate across all Public Sector Depts and are on all the major enabling frameworks, including; GCloud, DOS, Consultancy One, NMNC.

• In constant consultation with Legal/ Tax advisors and our customers to understand the position of our frameworks with regard to IR35

• Currently our understanding that all service based, project and specialist contracts fall outside of IR35

• For those operating under resource based contracts we are working with customers to look at options for packaging into service offerings

• We regularly review our contracts with QDOS• For roles clearly inside of IR35 we are offering

umbrella options

IR35 Off Payroll

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New Off Payroll Rules in the Public Sector

Presented by:Samantha Hurley23rd February 2017

Proposed New Rules

For public sector placements Chapter 7 ITEPA (IR35) no longer applies

New Chapter 10 ITEPA with effect from April 2017 Responsibility for status assessment & payment

of taxes/NICs moves from PSC to person paying PSC (the “fee payer”)

“Public sector” definition very wide – FoI Act

New Legislation - Chapter 10

In scope: Public sector body subject to FoI Contractor performs (or obligation to) work

personally Personal service company (intermediary) in chain Contractor would otherwise be considered

employee for tax purposes

Introduces a chain of payments from public sector body, down the chain for the contractor’s services

Outsourced services Anti avoidance measures – offshore Effects payments made for live placements on-

going as at April 2017 Final legislation and guidance expected March

budget

New Legislation - Chapter 10

End Client’s Role

PS body must inform if contract in or out Written request/queries on decision – 31 days Public sector body becomes fee payer if no

response

Due to lobbying HMRC considering: Client must take reasonable care Removing written request Requiring body to provide info earlier to fee

payer Appeals process Excluding expenses from deemed payment

Making the Determination

Public sector body may take “low risk” approach & decide all placements inside

Need accurate, up to date information from the parties

Liability goes to PSC if fraudulent information provided

HMRC’s on-line Employment Status Service tool Employment Status – decades of case law & tax

tribunal decisions Multiple factors – PSC and assignment – ESS

focuses on assignment only

HMRC Online Tool

Called Employment Status Service (ESS) Not compulsory Can be used by any party in the chain If information accurate, you can rely on the

outcome Members tested in December 2016 Further beta testing in February 2017 Public pre testing March 2017 April launch

Contractor Inside Scope

The fee payer will be required to: Treat all payments as earnings, deduct VAT,

expenses and then apply employment income tax & employee NICs on the contractor's fees; and

Pay the tax & NICs deducted as well as employer NICs to HMRC through the RTI system

Need to consider how employer’s NI will be funded

Our Concerns

Determination – how can parties be compelled to give accurate information?

Quality of on-line ESS tool Impact on the public sector

• Pressure on costs/margins • Pressure on quality and availability of

resource• Struggle to complete projects on time, in

budget• Ability of public sector to provide accurate

employment status

Challenges

Working closely with public sector clients Identify contractors in scope Identify where ultimate supply is into public

sector Develop robust status determination process

with clients When to start process of client status

confirmation? Communication with clients, MSP/VMS,

contractors

Challenges

Current placements with end dates beyond April 2017

Right to vary fees in terms with contractors? How will contractors react – early terminations;

rate increase requests; move to umbrella or PAYE, MSC risk?

Deemed payroll calculation – can payroll systems support?

External/Internal resources, processes & staff training needs

External solutions being offered to recruiters

Our Guidance & Action

Guidance for members at http://www.apsco.org/guidance.aspx

Guidance for clients and contractors coming soon Standard contract amendments Continuing to engage with HMRC

PayStream - The Accountancy Service Provider

Dealing with Public Sector changes

Choosing PayStream makes perfect sense

• Offices in Altrincham and London, with around 200 staff

• Tailored advice to contractors offering both PSC and Umbrella, and back office services to recruitment agencies

• Growth and reputation built on compliance and service

• In-house IT team allow innovative, agile service delivery

• Compliance team of 8 to proactively support change and with in-house IR35/SDC reviews available to contractors

• Focus on delivering quality service – key service metrics monitored on a weekly basis

• Award winning service voted best Umbrella provider in the Contractor UK Reader Awards 2012, 2014 and 2016 and also best Accountancy Firm runner up 6 years running 2011 - 2016

• We’ve been established for over ten years and are now working with over 14,000 contractors each month

Why we are different

Working within the Public Sector

• IR35 and the public sector – What is happening?

• Challenges within the market place – The likely effect

• PayStream service offerings

• Case Studies with illustrations

• Questions

Why you can count on us

What is public sector?Definition

The Freedom of Information Act 2000 and the Freedom of Information (Scotland) Act 2002 defines the public sector as broadly including:

• Government departments, legislative bodies, armed forces • Local government • NHS • Schools and further and higher education institutions • Police • Other public bodies (listed in a Schedule including bodies such as The British Museum, BBC, Channel 4) • Publically owned companies (wholly owned by the Crown and/or the wider public sector such as TFL)

• It does not include private companies carrying out public functions e.g. outsourced IT function

IR35 and the public sector

• IR35 test remains the same• Primary responsibility for determining whether IR35 applies moves from PSC to payer of PSC

• If caught by IR35 payer must:o calculate employment taxes and NICso deduct and pay employment taxes and NICs to HMRCo pay net of tax figure to PSCo make RTI submissions to HMRCo 5% allowance currently available to those inside IR35 removed for those in the public sector

• If not caught payer can pay PSC gross

• Public sector bodies required to provide information to agencies about whether engagements are inside/outside IR35 – n.b liability does not pass if incorrect

Headlines

How will IR35 determination be made?

Existing rules still apply. Factors to be considered include:• Right of substitution• Part and parcel of organisation• Mutuality of obligation• SDC

HMRC have produced online tool which assists in making assessment:• Tool still being developed but should be ready for April• 50 questions based on existing case law• Likely to give “caught” answer

HMRC has indicated that certain professions will always be caught:• Social workers• Nurses• Teachers

Certain public sectors may refuse to work with PSCs:• TFL?

HMRC Tool

• Public Sector no risk approach: no PSCs or all PSCs caught

• Public Sector to engage PSCs through agencies only – gets rid of risk as not the payer but politically may be difficult

• Jobs will be advertised as inside/outside IR35

• PayStream provide additional comfort by offering:o Free IR35 reviews to existing customerso IR35 reviews to non-PayStream customers for a chargeo Certificate of compliance to provide to public sector bodyo Ongoing support if IR35 status challenged

• Contractors will ask for uplifted rate

• Switch from PSC to umbrella

IR35 and the public sectorThe likely effect

PayStream service offeringsThe choices

PayStream service offeringsMy Max benefits – the umbrella that gives you more

PayStream service offeringsCase Study

An Operations Manager within NHS is currently working outside IR35 via their own PSC, and is being paid £500 per day.

*Includes necessary self assessment deductions

 

Contractor rate - £500 per day

PSC 2016 PSC 2017 PSC Public Umbrella

Weekly Net Pay £1637.06* £1635.28* £1394.53 £1415.59

PayStream service offeringsCase Study

A Web Developer is currently working outside IR35 via their own PSC, and is being paid £350 per day.

*Includes necessary self assessment deductions

 

Contractor rate - £350 per day

PSC 2016 PSC 2017 PSC Public Umbrella

Weekly Net Pay £1232.37* £1232.03* £1014.28 £1034.95

Why PayStream makes Perfect Sense…...ensuring you and your contractors receive the best service every

time• Long standing robust business with a reputation for doing business the right

way• Innovative and expanding service range tailored to contractor needs

• Slick processes:-• Join in under 10 minutes with MyMax• Free mobile phone app, Online access to accounts

• Dedicated points of contact for Contractors • Unrivalled contractor experience through delivering exceptional customer

service• Award winning services backed by numerous accreditations

• To enquire, contact the new business team directly on 0800 197 6516 (option 1) or email newbusiness@paystream.co.uk

Questions

Thank You

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