IR35 - How does it affect you?

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IR35 - How does it affect you?


The new rules on IR35 will apply from 6th April 2017, as announced in the 2016 Budget and the aim is to reform IR35 in the public sector. So this will affect you if you are working as a Limited Company and providing services to the public sector. We are in negotiations with a few companies offering a Umbrella Service, we will release further news on the chosen company shortly.

These are the key proposals:

If you work for the public sector, through your own limited company, the business that pays your company (lets call them the paying agent) will have to assess the status of your working practices.

  1. Where practices are deemed employment, the paying agent will deduct income tax and employee's National Insurance (NI) before transferring the net funds to the limited company.
  2. Income Tax and NI will be based only after allowing expenses that are available to everyday employees, so expect travel and subsistence (T&S) tax relief to be lost.
  3. HMRC are not convinced that a 5lat deduction (adopted by the existing IR35 rules) is appropriate and will consult on that part.
  4. The tax deductions are paid by the paying agent to HMRC together with the employers NI, which is no longer the liability of your limited company.
  5. Your company will still have to pay corporation tax under normal rules, but if you have taken money as salary or dividends, then an offset will be available to avoid double taxation.

So what exactly is the IR35? This is a tax legislation designed to tackle tax avoidance by workers supplying their services via an intermediary, e.g. a limited company, but would be an employee if the intermediary was not used. These workers are known as disguised employees by Her Majestys Revenue and Customs (HMRC). Their sole aim is to avoid paying the corresponding income tax and National Insurance Contributions (NIC) a permanent worker would.

The responsibility lies with the individual contractor. The WNA Group will do everything we can to assist all our affected members and this includes hosting Webinars, and one to one sessions to help you navigate through the IR35 minefield. However you do not have to be a WNA healthcare member to benefit from this, we can help you as long as you work as a healthcare professional within the NHS either directly with them or via an employment agency like ours.

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To watch a Webinar on IR35, click the video below: