Schedule 1 to the Finance Bill 2017, confirms the new provisions for off-payroll working in the public sector (applying IR35), will take effect from 6 April 2017. This will affect a huge number of workers, particularly doctors working as locums, nurses, teachers and other consultants.
If our client provides personal services to an organisation which we suspect is a public body, we need to review the HMRC’s technical guidance on these new rules. But remember that guidance represents HMRC’s interpretation of the rules, it is not the law.
In brief, the public body (the end-client), has to make a decision about whether the worker is within IR35 before the contract is signed, or if the contract was entered into before 6 April 2017, before the first payment on or after that date under that contract. If the public body incorrectly concludes that IR35 does not apply, it can become liable for the tax and NI which should be deducted from payments under the contract. Public bodies are likely to conclude that all services provided by external workers are caught.
Most public bodies won’t pay the worker or his company (the PSC) directly, as the payment will be routed through an employment agency (the fee-payer). It is the fee-payer who must deduct tax and NI under PAYE from the amount payable, net of any VAT charged.
HMRC’s examples (“journeys”) explain how the PSC should report the income it receives for corporation tax purposes, and how to apply PAYE to any salary paid to the worker out of monies received from contracts outside the public sector.
If you have any questions on the above please contact our office.