Use of limited companies within the Public Sector
As you may have heard, the government have made changes to how workers can operate when they are working for public bodies. This includes your contract and as a direct consequence the way in which you will be paid will change from the 6th April 2017. You are currently receiving your payment for work undertaken direct to your limited company. From 6th April HMRC have decided that the way in which the contract is undertaken will fall within the IR35 legislation and therefore you will no longer be able to operate as you do.
Further information and guidance can be read using the following link:
Up until now, IR35 has been the responsibility of the director running the company and therefore whether IR35 has been applied correctly has rested with the worker. From 6th April this will all change and the public body will now dictate your IR35 status. It is irrelevant whether or not you, your accountant or us feel differently, we have to accept the public bodies decision. HMRC are planning to provide the public body with a tool to help in assessing the IR35 status although at the time of writing the tool is still under development. Therefore most public bodies are taking a blanket approach that all contracts are within IR35 and therefore PAYE will need to be applied.
After comparing pay in relation to these changes we feel that the workers best option will be to operate through an umbrella company. This means that we can continue to pay the same limited company rate to your umbrella company and they can operate PAYE on your behalf.
After an investigation into various umbrella companies we have decided to work with Crystal Umbrella. We have managed to secure a significant discount on their usual costs and all insurances; including Medical Malpractice, is also provided.
What if I want to keep my company?
You may continue to operate through your company; however you will receive a reduced rate and personally be subject to PAYE deductions. You would still need to manage your company and all the costs would be met from your net salary. To administer this change we have partnered with a professional firm, Inline Outsourcing, who will add you to their PAYE scheme and make payment to you.
The PAYE rate being offered will be calculated by dividing your current contract rate by 1.143. You will not be an employee other than for tax purposes and not be entitled to any employment rights in the same way you dont now. However, the costs of utilising this option are being met by us and there are no further deductions being made other than employees TAX & NIC.
An example rate reduction would be £20.00 divided by 1.143 equals £17.50
To pick this option, you will need to inform us by 17th March so that we can terminate your existing contracts and arrange for Inline outsourcing to issue you with the new appropriate PAYE contract in readiness to be paid from 6th April.
What if I dont agree with this?
Basically, it is out of all our hands. You can request your hiring manager reviews your status and only if we are informed that you can operate outside of IR35 by them directly can things stay the same. Whilst the HMRC tool is not available, please feel free to use the questionnaire via www.ir35advice.com to check your status.
What about alternative solutions?
We have been approached by various providers offering lots of different solutions from loan schemes and share schemes. None have been able to demonstrate how they comply with these changes and therefore we will only be recommending the above options from the 6th April. If you have found your own resolution, this will be acceptable by us, but we are not liable in anyway should your chosen solution fail the IR35 compliance.
Whilst these changes are not welcome by anyone, I am sure you will appreciate this new legislation has been issued directly from HMRC and have been driven through by the end clients, so our hands have been tied and we have had no choice but to enforce them.
Please note therefore these changes will come into force on the 6th April 2017 and you will need to notify us of your preferred choice as soon as possible. Failure to notify us will mean that your contract will automatically be processed by deducting PAYE as above for all payments made from 6th April 2017.
This does mean that any work which is due to be paid post 6th April will fall under IR35, meaning all work commencing 27th March will fall under the IR35 rulings. If you have any outstanding timesheets please get them to us as soon as possible to ensure processing prior to the IR35 coming into force.
We look forward to receiving your choice and thank you for your continued support.
From The WNA Group