By Ashley Preen
February 17, 2017
The new set of IR35 rules known as ‘off-payroll’ working affect contractors working in the public sector. These rules do not affect contractors working in the private sector though. This guide will explain how the new rules work.
The new rules will apply to payments made by the ‘fee payer’ (public authority or agency) on or after 6 April 2017. Contracts that are operational on or after this date (6 April 2017) will have to abide by these new rules.
Contractors that work in the public sector through intermediaries or PSCs should consider their current contracts to prepare for these new rules. New contracts that take the new IR35 rules into account should be drawn up as soon as possible. These new contracts should be applicable from April 6th 2017.
HMRC wants to ensure that all contractors will pay employment taxes and NICs which was been side-stepped through working for PSCs. The 5% allowance for ‘off-payroll’ administration costs will be removed to simplify administration.
The New IR35 ‘off-payroll’ rules affect contractors working for the public sector through a personal service company (PSC). It also affects public bodies, agencies and partnerships who act as an intermediary for contractors.
The new ‘off-payroll’ rules do not apply if:
This new digital tool should be available before the 6th April 2017.
Those at risk of investigation are contractors who work for a PSC and whose contracts will still be in effect on or after April 6th 2017. The reason for this is that a public sector body must apply the new ‘off-payroll’ rules for payments made on or after April 6th 2017 even if the contract was entered into before this date. HMRC may very well open an IR35 investigation if public sector bodies apply the new rules to those who were once outside IR35 rules.