Off Payroll working in the public sector. Reform of IR35 from April 2017

As you may be aware, there is yet more HMRC legislation on the horizon so we have put together the following guide to inform you of what the implications are of the latest changes.

What’s changing?

As of April 2017, the way in which agencies engage with Limited Companies or Personal Service Companies (PSCs) is to be changed specifically when operating within the public sector. Importantly, this does include the NHS. Any payments made to a Limited Company that fall within certain criteria will need to be treated in line with PAYE rules and therefore taxed accordingly.

So, what does it really mean?

For people who are paid from an agency into their Limited Company, this will mean that under certain circumstances, rather than receiving gross payment on invoices, as has been normal practise, payments will be subject to standard income tax and NI deductions before being made to the Limited Company account.

Why’s it changing?

The government are tackling what they believe to be mass ‘disguised employment’ across the industry as they believe people to be ignoring IR35 legislation and seek to maximise their income at the expense of the Exchequer. Therefore, the idea behind both the existing rules and the latest proposed adjustments to those rules is that the government don’t believe it fair for two individuals working alongside each other on broadly similar terms and conditions to be treated differently for tax purposes. For example, an agency worker working a shift in the NHS through an agency should be taxed in the same way as a full time worker who has a direct contract with the NHS.

Establishing who’s caught inside these changes

Where an agency is the engager, HMRC have devised a pre-checking process for an agency to follow to determine if someone falls within scope of the adjusted rules. The following steps will need to be performed first;

IR35 flowchart 1

If after following these initial steps the Limited Company in question is still deemed to potentially fall within scope, the agency must then consider the following;

IR35 flowchart 2

If the worker answers to both questions as ‘yes’, the worker is in scope for the off-payroll rules and the agency will need to account for tax and National Insurance on their payments to that worker’s Limited Company.

Who’s responsible for what?

Under the new rules, it will be the Public Authority that will ultimately decide whether PAYE and NIC need to be operated and it is therefore their responsibility to inform other parties in the supply chain and ensure that the rules are followed. What this ultimately means is that it is no longer the choice of an individual to be paid via their own Limited Company and that this decision must be made further up the chain as it is the Public Authority – i.e. the NHS and the agency that the risk and liability now lies with.

So what happens now?

Having reviewed all relevant job roles against the above criteria, it is the decision of Bluestones that we do not feel that any worker is likely to fall outside of the scope of this legislation therefore we have a duty to uphold compliant practice and protect everyone in the supply chain from any potential liability.

From 6th April 2017 Bluestones Medical will not be allowing any workers to be paid directly into their Limited Companies. This decision has been based on solid advice and guidance from reputable sources.

We will still offer weekly payment via our chosen company, Quest Pay Solutions, via their Umbrella or PAYE model.

Please note that every care has been taken to ensure that our decisions benefit you our workers, but we cannot ignore this change in legislation. All agencies will be coming under the same pressure from HMRC and this is not something particular to Bluestones Medical and our associated companies.

Bluestones Medical will be ensuring that you receive many benefits of being part of our organisation, such as, a large variety of shifts and excellent pay rates, but we will also be introducing other bonuses for our most loyal workforce very soon.

We are advising that all current workers who engage with a Limited Company register with Quest for their future payments from Bluestones Medical. They are our company of choice based on their high level of compliance, excellent service and value for money that they offer.

Please feel free to visit their website to review their services.

Should you have any queries in relation to any of the above changes, then please contact your Bluestones Medical representative who will be happy to advise further.