Tax changes for public (and private) sector workers
Working in the public sector
DON’T think this doesn’t apply to you. The public sector is very wide and as well as obviously the NHS, includes the BBC and Channel 4 amongst many others. There is a very long list.
There has been so much about this in the general press, let alone accounting and tax releases, particularly because of the workers affected at the BBC. All contract or freelance workers should be well aware of the restrictions the Government has imposed on the use of personal service companies (“PSCs”) in the public sector. The changes came into effect in April 2017 so we have all been working to the new regulations since then. If you need more information about this and how it affects you specifically then contact us directly.
In brief, where a worker operates in the public sector through their own PSC (or similar) the responsibility for ensuring that IR35 has been applied correctly has shifted to the body paying the PSC, normally an agency or recruitment business. Prior to April 2017, many public sector workers would have been able to work outside of IR35 as a “self employed” worker.
As it is very hard if not impossible for agencies and other recruitment businesses to establish whether a worker is effectively employed or self employed, on a contract by contract and day by day basis, this has resulted in most cases in PAYE being applied to the payments at source.
If you work in the public sector you could now have lost the advantages of working through an intermediary using your own limited company. You should not be any worse off by using the company as compared to a salaried employee, but you will not be able to make the tax and NI savings you currently enjoy.
After initially treating everybody as within IR35, the NHS issued an update which said effectively that the NHS got it wrong and that a “one size fits all” approach just does not work. Following pressure, particularly from representative bodies like the Locum Doctors Union, the NHS will assess each case and position on its merits.
What should you do next?
Firstly, don’t be too quick to jump ship and close your PSC. It will be useful if you obtain another contract that is structured differently, or particularly outside of the public sector and not affected by this for now.
Where you are working in the public sector, we suggest that where possible you look for work elsewhere. If you work in the NHS, you could ask for an assessment of your position. The new IR35 rules only apply within the public sector so you can still quite properly work as a self employed person in the private sector (provided of course the nature of your work is not as an employee). If the way you work has not changed, then outside of the public sector, you should be able to continue to use your limited company and NOT pay PAYE on your income.
What happens next
There is a move to introduce similar legislation to regulate the private sector, possibly from April 2019. There are mixed opinions on this and a strong suggestion that this will be deferred, maybe for a long time, because of other legislative pressures (Brexit!) and also because the public sector changes have not worked well in practice. We will keep you updated on developments.
For further advice existing clients email us at support@anytime.uk.com or call 03333 110 230
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