Q. IR35 and Public Sector. I am currently contracting in the Public Sector with the strong chance of renewal and looking at all my options. Which seems to be moving to the private sector in April (with increased competition with all public sector contractors doing the same) vs increase my rate to counteract. I have read this article online UK.gov are telling contractors to increase their rates to be 20% from April 2017. Is this figure of 20% correct? £425 per day 43 weeks £3000 expenses £8000 salary Are there any inside/outside IR35 calculators you recommend? I get a different result from each one I try.
A. For an accurate figure it might be worth asking your accountant to undertake a deemed payment calculation, based on your specific circumstances. You could also try HMRC’s deemed payment calculator (XLS), as a start – this will give you the deemed payment and from there you would simply need to work out the net liability, which your accountant can help you with. Once you have an idea of what your liability is under IR35, this should help you to determine how much extra you would need to charge, if this is the route you choose to take.
This answer is provided by Qdos Contractor.
Surely that depends on you being declared as inside IR35 by the public sector body you’re contracting for – are they planning on batch classifying everyone as inside? That would seem wrong.
Let me start by introducing The Contractor Group! We’re an umbrella company with a difference, one that has genuine and compliant solution to the Public Sector IR35 reforms, and one very much based here in the UK.
We’ve seen numerous publications and held endless conversations with contractors seeking solutions to what is, and let’s be clear here, a masterstroke by government. Sure, it’s not a popular move and it’s certainly one that very few support, or worse, even understand, but it will have its desired effect and, initially at least, draw revenue for the exchequer.
Yes, there is an obvious solution in rate increases but which Public Sector body can support that in these difficult fiscal times. Look at TfL as an example, last year government pulled £2bn of their allotted funding. Same too with the NHS, without even quoting figures it is a well known fact that the NHS isn’t flush, and even if they could justify it can you imagine the headlines when we’ve got patients lining the corridors waiting for beds. So, where are these rate increase going to come from? I think it’s fairly safe to assume that it’s just not going to happen.
Not only that of course, but Employer’s National Insurance Contributions will now also fall, due at 13.8%, and this too has been a well debated subject of late but I think it’s fairly safe to assume that the Public Sector body won’t be picking this up either, leaving only the contractor or the agency (if there is an agency). My money is that it’s on the contractor, particularly when you consider that many agencies are operating 5 or 6 percent margins.
The Private Sector is another option, though drastic. What’s also worrying is that the currently unaffected Private Sector is rubbing its hands with glee, watching all this reform play out, I’ve held several conversations with Private Sector hirers whom purposefully have held off hiring knowing that the market will become extremely buoyant with contractors very keen to make the switch, meaning that they not only get the pick of the bunch, but that they use it to their advantage to drive rates down.
So, what now? Since release of the draft legislation The Contractor Group have worked tirelessly to secure a QC tax expert ratified solution that has been further endorsed by Chartered Accountants to provide contractors a mechanism to maintain their status and income, the way they always have, whilst meeting the conditions for “employment” as defined by HMRC to satisfy engagement through an “umbrella company.”
The solution is called the Advanced Umbrella, it’s unique to The Contractor Group so it’s only available with us. As we quite openly admit, it’s actually not that “advanced” at all, that’s to say that it’s quite simply just a UK based umbrella company. Obviously there is a difference, a big difference in fact, and it’s one at the backend of the umbrella process whereby we facilitate engagement with our Private Sector partners.
In very simple terms, an individual is employed with us and receives a basic £11,500 annual salary. The balance is picked up through the contractor’s PSC from the Private Sector client, and since the Private Sector is unaffected by the reforms it is therefore up to the individual to decide their own IR35 status.
What’s also great about the Advanced Umbrella is that the individual not only meets the condition for “employment,” as defined by HMRC, satisfying both the Public Sector body and HMRC, but that the basic £11,500 salary creates an audit trail beyond 06 April 2017 of the individual being a low income earner (assuming the individual paid themselves a similar salary previously).
Sounds simple, right? It is, at least to the individual and the PSC, for us it’s complex and difficult to administer but with over 100 years of combined contracting experience within our group we know it’s worth the effort in support of the contractor community. What’s more, and just to be clear, we are UK based, it is not a scheme and it’s certainly not one of those dodgy offshore 90% arrangements.
Pay us a visit at our website for further detail and information at http://www.thecontractorgroup.co.uk
Can the umbrella company solution be used if the public sector body is required to acquire services through an agency such as Capita?
Most public bodies hugely reliant on contractors take the easy route of saying that all contractors are inside IR35 regardless of the reality.
Most public bodies hugely reliant on contractors take the easy route of saying that all contractors are inside IR35 regardless of the reality.
So… if you accept the organisations judgement (blanket or otherwise) and up your rate by 20% to compensate… what’s stopping HMRC from looking back at your (now accepted) IR35 status over the term of that engagement which for some, could be a number of years. I smell pending witch hunt !
I notice that outsourcing companies will be exempt… is this the overall master plan ? to get all contractors moved over to large outsourcing companies for ‘point source’ taxation (as opposed to thousands of individual targets)
Thoughts ?
what I really don’t get is that this is coming in two months and it’s still very unclear what the rules are re In or Out of IR35. I will be affected and it does seem unfair (easy for me to say, I know). the reason: no annual leave, sick pay, training rights, notice period pension contributions. how am I an employee?
I am of the understanding that this rule change has come about because HMRC weren’t terribly efficient at auditing and chasing whether people were in or out of IR35. So if they had no capacity for that, then I think it’s unlikely they would suddenly have the capacity for witch hunts on the 10s of 1000s or contractor suddenly falling within IR35. You could always close your company and start up a new company post April 2017 ?
Well, after being in Government work, and having plenty of offers I have decided to jump ship into the private sector at least until this mess is sorted out.
I have (and still have) plenty of public sector offers. When I ask the Agency is the contract in or out, which they and the end Customer MUST know, they tell me they do not know, so I tell them to go find out.
It is blatantly obvious that ALL public sector contracts will be IN IR35. They just do not want to say because they know we will tell them to get lost.
My response is that if it’s out of IR35, the price is X but if it’s in then the price is 2X. Simple arithmetic. It is not just that you will be taxed extra FROM 7th April but they will hit you for the additional for any time you worked on the contract BEFORE 7th April. This is highly dangerous if you’ve already worked there for some time.
Forget adding 20%. They simply reject this.
I am finding working in the private sector pretty good. The public sector experience leaves you pretty sharp with current methodoligies and solutions so you have plenty to offer. I have seen no change in the level of opportunities in the private sector because with IT projects things change quickly and need resolving quickly.
Do NOT underestimate the Revenue. They have no morals whatsoever. They have already tried to give our jobs to the foreigners – instant visas, offshoring, tax allowances for non-uk residents for two years, you name it, and they have failed.
We are NOT employees. We have no holiday pay, no sick pay, no security, nothing. Pay all this NI – Huh, try and draw the dole when you’re out of work and you will be told that you should have foreseen that you would have no work as you are a Director so you will not get dole.
Does Revenue go for the real tax evaders? The large corporates, the large consultancies that charge double what we are being paid? You betcha they don’t.
I cannot understand some that say they cannot afford not to work, and so will stay put and pay the ridiculous tax. All you are doing is making it worse for the rest of us. There is plenty work out there, just go get it.
This whole issue of IR35 will fall out in the wash. Right now we cannot make any proper decisions because we do not know what the rule book is. The public sector Customers are not stating IF a position is IN or is OUT of IR35. Come April they will have no option but to state which way a specific role points. Why can they not give that decision now? It is clear that their roles will be IN IR35, so they just do not want to say because if they do they will have no takers.
So thank you very much, if my private Customer continues to treat me as well as they do, and I can continue to make a good contribution then I’m staying exactly where I am and will watch the situation play out from the sidelines. It will play out, and we will have a solution but we cannot have a solution at the moment because we don’t know the game play.
I am not going to worry about the private sector work being caught by IR35 because private clients can adjust the contracts to suit.
One fringe benefit incidentally being in the private sector is that the food in the private sector is superb. Excellent breakfasts and lunches, just like it was years ago in the public sector when we were treated as human beings.
Yes, I am fed up with the way we are being treated as scum, as criminals, as tax evaders and the rest, when it is quite clear that we are not.