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IR35 changes and the impact a few months on

Published on: 23rd August 2017

IR35 changes

Earlier this year changes came into force which would have an impact on workers in the public sector as well as recruiters and hirers. The IR35 changes for public sector workers were dreaded by many in the industry and were brought in by HMRC to tackle the perceived problem of false employment.

The changes have meant that the recruitment agency (or whoever is paying the contractor, so in some cases the client where the contract is direct) now have to decide if a contract is inside IR35 or not. The responsibility for determining status has shifted and this has caused concern for recruiters.

Since April if a contractor in the public sector is deemed to be inside IR35 then the contractor should be taxed at source prior to receiving their pay, this is still the case even if the contractor is operating as a PSC and has previously been responsible for his own tax affairs.

A few months on from the changes and the dust has settled. The changes have however highlighted the importance of working with reputable, compliant partners.

There have been recent reports of some umbrella and payroll companies creating new schemes in a bid to attract contractors working in the public sector and offering high returns on their income on schemes which aren’t fully compliant.

Schemes which have been called in to question include one which offers advance gross payments which are disguised as bonuses. Tax is due on these at a later date but according to reports, contractors haven’t been made aware that tax is due. Other schemes which should raise alarm bells include where payment is offered in the form of annuities, loyalty points or any scheme which promises unrealistic take home pay.

In light of the recent changes it is more important than ever that recruitment agencies placing workers on temporary assignment within the public sector work with an umbrella company partner who are professional, compliant and have a good understanding of tax law and legislation. It is also vital that they provide clear information to recruiters and contractors.

At Exchequer Solutions we are fully compliant and can offer our services to contractors on our umbrella scheme or for those that operate a ltd company and can demonstrate they are outside IR35, our sister company Exchequer Accountancy Services can help.