Providing assurance of your tax status
Following HM Treasury’s ‘Review of the tax arrangements for public sector appointees’ in May 2012; guidelines were implemented to ensure that public sector self-employed workers were not using off payroll arrangements as a form of tax avoidance.
The guidelines state that those working within senior management specifically should be paid on the government body’s payroll. Those who are long term contractors (longer than six months and earning over £220 per day) will be required by the government body to request the contractor to provide assurance of their tax status; usually within the specified period of 20 days.
If you do not provide your client with the appropriate assurance of your tax status; the client has the right to terminate the contract and could pass on your details to HMRC.
Since this report was issued back in 2012, there has since been a second evaluation of the guidelines to ensure that those working as temporary government contractors are meeting their tax obligations (5th May 2015). The report showed that 95% percent of government departments were compliant when ensuring that their off payroll workers were providing the correct tax assurance. The evaluation found that two government bodies failed to follow the guidelines correctly. The Ministry of Defence have been fined £1m for failing to seek tax assurance on a number of their workers due to administration errors. The Department of Health has also been fined £470,740 for having two board members working off the payroll for over a year, where both individuals had provided assurance in relation to their tax arrangements.
As a contractor the government department or Agency will request that you provide them with assurance of your tax status. They will want to ensure that you are working compliantly with regards to IR35. In order to gain the assurance they usually request a contract review, to ensure that your contract is compliant. A working practices review is also extremely helpful when determining your IR35 status. In an HMRC enquiry your working practices will weigh more heavily than the written contract itself. This can also help to satisfy the client when they are seeking assurance of your tax status. Some end clients actually request that their contractors complete a working practices questionnaire with a view to signing it if they are in agreement to such working practices.
It is not always plain sailing for contractors when providing assurance of their tax status. There are government bodies that believe that HMRC are the only body that can approve status. Other government bodies adopt different requirements and strategies when seeking tax assurance from their off payroll contractors. However we are more than happy to get involved and assist end clients where possible in order to help you provide the necessary assurance.
The public sector guidelines (Policy Procurement Note); advise using HMRC’s contract review service, as a way of providing your client with assurance. Our advice however is to be cautious – HMRC will often require more information than just your contractual terms in order for them to provide you with an opinion and ultimately there is the risk of becoming subject to an IR35 enquiry. Additionally it would also be unlikely that HMRC would be able to complete a review within the specified time frame (of 20 days) as they simply do not have the resources to achieve this.
There is another way – and the public sector guidelines do indicate that you can seek independent advice. Qdos has defended over 1500 IR35 enquiries and are well known in the market as experts in IR35. We provide completely independent and unbiased advice, and we would never discuss your personal tax matters with anyone other than yourself.
Our Public SectorIR35 Solution pack provides a review of your contractual terms, and a review your working practices in order provide an outcome in which reflects reality. If we are happy with your status from an IR35 perspective we will issue you with a certificate that is designed to present to your client as the necessary tax assurance. If we review your documentation and we consider that your engagement is caught inside of IR35 then we will work with you in order to improve your tax status.
This article was written by Sophie Withers Qdos Contractor
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Qdos Public Sector IR35 Solution packs are charged at £125 +VAT and can be supported by one of their Tax Enquiry insurances from £99 per year; providing additional protection in the event of an enquiry. For contractors wanting total peace of mind their TLC35 cover is a comprehensive policy which will not only cover you for the defence costs during an enquiry, but will also cover the tax, interest and penalties if HMRC deem you to be caught by IR35. For more information please see links below:
Tax Enquiry Insurance
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