By John Thorburn With the IR35 changes only a matter of weeks away, we look at some of the myths surrounding the Public Sector reforms and help you to separate the fact from fiction:
Myth 1: The legislation should be adopted now The reform will go ahead from 6th April 2017 but only the draft legislation for the Finance Bill 2017 has been published so far. Following a period of consultation we are still waiting for the final version of the legislation, which is anticipated to be released at the Spring Budget on 8th March, together with relevant HMRC guidance.
Myth 2: All PSCs operating within the Public Sector will be subject to IR35 This simply isn’t the case. It might seem like the taxman is trying to catch everyone in their attempt to end ‘disguised employment’ but even HMRC have estimated that 10% of people will still remain outside of IR35 post April.
Myth 3: This will affect all PSCs in the Private Sector too At this stage, the changes will only affect the Public Sector. The Private Sector is excluded from the legislation, with the IR35 status decision remaining with the PSC.
Myth 4: IR35 status is based on Supervision, Direction or Control (SDC) Incorrect. IR35 is based around a wider range of employment status issues and case law. HMRC are soon to unveil their Employment Status Service digital tool to provide their view of whether any current and prospective workers would fall within the new off-payroll rules. Whilst still under development, it is thought to contain over 50 questions to arrive at a result.
Myth 5: A new solution or model is required There is already a wealth of options available for every scenario post April:
Our existing Employment Business (commonly known as Umbrella) is the ideal solution for those who are deemed to be inside IR35, with Danbro taking care of Tax and NI calculations and deductions. It is likely to be more financially beneficial for the contractor, as well as hassle-free for the agency. Those who choose this solution can also benefit from statutory payments, pension contributions, holiday pay, Bupa Cash Plan and much more.
Likewise, there is still a place for the Limited Company solution and if you are found to be outside of IR35 rules, the option to keep your PSC (Personal Service Company) is very much accepted by HMRC. However, if you’d like to continue to work through your Limited Company while inside IR35, you’ll be subject to Tax and NI, receiving a net salary.
At Danbro we offer the extra option of retaining your PSC in a dormant state while working on short term Public Sector assignments. We’ll simply put your Limited Company fees on hold while you utilise our Employment Business.
Myth 6: Umbrella Companies are affected No, compliant Umbrella Companies are excluded from the legislation. With Danbro, you can rest assured that you’re with a compliant and risk-free partner.
If you’d like advice, call our expert team on 0800 731 3178 to discuss your options post April.