IR35 changes for public sector contractors
New legislation has changed the IR35 rules for contractors. The new rules apply to any payments made on or after 6th April 2017, including payments made for contracts entered into before this date.
Who is affected by this change?
Individuals working in the public sector who work through intermediaries, such as personal service companies, are no longer subject to IR35 rules. This includes:
- Public authorities hiring off-payroll contractors
- Public sector managers – tax, payroll, human resources and procurement
- Agencies who supply contractors to the public sector
- Contractors providing services to a public authority through an intermediary.
Who decides whether work falls within IR35?
Previously, intermediaries were responsible for calculating and paying the contractor’s income tax and NI owed to HMRC. Now public sector organisations or agencies paying off-payroll workers are responsible for deciding whether the work falls within IR35. They must deduct income tax and national insurance (NI) if they deem the worker an employee within IR35.
What impact will this have on contractors?
Contractors working with any of the following public sector organisations will no longer have their IR35 status determined by their intermediary:
- Government departments
- Police and fire authorities
- Local authorities
- Educational institutions including universities
- The BBC and Channel 4
The NHS was previously included in this list with “all locum, agency and bank staff” falling under the new tax rules. However, in response to complaints by doctors, the regulator has told health trusts to examine each case on an individual basis before deciding whether agency workers are covered by the new IR35 rules.
If you’re not sure how this change will affect you, contact NWNBluesquared for advice.