littleteapot

IR35 in the public sector

IR35 in the public sector - are you affected?   19 members have voted

  1. 1. Are you working through a limited company outside IR35?

    • Yes
      10
    • No
      2

Please sign in or register to vote in this poll.

28 posts in this topic

The Autumn statement confirmed that the way that IR35 applies in the public sector is changing.    IR35 affects those working through a Ltd Company, and is intended to identify those who, if the company were absent, would be "employees" of the client.   If you are IR35 "caught", you need to treat 95% of your company's income as if it was salary, and pay employers NI, employees NI and income tax on the full amount.   Travel and subsistence expenses are not allowed if IR35 caught.   Up until now, it has been down to the locum to decide whether IR35 applies, but this is changing from April '17, when the end client will need to determine whether IR35 should apply, and the next party in the chain (often an agency) will deduct the taxes before passing the net amount to your company.  The 5% allowance is being removed.    

There is a lot of information out there, so if you think these changes could affect you, it's essential that you read up and understand what is changing.

 

1 person likes this

Share this post


Link to post
Share on other sites

Hello,

how would the IR 35  affect the Locums working through limited company.

how much the difference of pay would be.

Could any one throw some light.

 

Many Thanks

Share this post


Link to post
Share on other sites

Under the new rules, it will be for the client to determine your IR35 status.  HMRC will be providing a tool, but it is not available yet.

Note that this applies to all payments made after 7 April, so work done in March will likely be subject to the rules.   There is also a risk that, if you're currently operating outside IR35, and you move to be inside in the same role, that this will raise your risk of a retrospective investigation.   So if you don't already have tax investigation insurance, you really should consider getting it.

Being inside IR35 means you will have to take all the income as deemed salary - NI and PAYE will be deducted by the payer.   You will not be able to claim travel and subsistence expenses.

The difference to your pocket depends on your current set up and really is individual. 

There's a good, free guide on IPSE's site - I don't know if links are allowed, but if you google "ipse ir35 guide public sector" you should see it at the top of the results.

 

 

Share this post


Link to post
Share on other sites

Thanks  littleteapot for your response

Share this post


Link to post
Share on other sites

Hi. The new rules are unlikely to reduce the current demand for locum workers in the NHS. There is some more information available including a set of FAQs for healthcare professionals who locum in the NHS on the Medacs Healthcare website. If you search for “Medacs Healthcare and IR35” the pages will appear at the top of the search results.

Full disclaimer: I do work for Medacs Healthcare and the answers formed part of a research article I did for them. Visit the Medacs Healthcare site to read the full IR35 piece.
 

Share this post


Link to post
Share on other sites

Hi Jat

Your article says that the rules will apply to umbrella users.    Most locums using a standard umbrella structure will not be in scope.

See https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note#umbrella-company

"Where an umbrella company employs the worker directly and not through an intermediary, the new off-payroll rules do not apply. Some umbrella companies do not employ the worker directly and so this should be checked. If this is not the case then the normal rules apply. "

 

 

Share this post


Link to post
Share on other sites

When a locum is employed directly by umbrella company, the ltd co fails to exist and you pay the normal level of taxation. Its how many people did in the past and it wasn't any better than PAYE, so people shifted to Ltd Co.

the bottom line is there is no way out unless u work in Third sector or Pvt sector.

Share this post


Link to post
Share on other sites

Yes, exactly.  With an umbrella you already take all the income as salary, so the new rules will not apply.

Share this post


Link to post
Share on other sites

So are we going to get annual leave and study leave and sick leave and pension contributions paid by the employer? Perhaps worth asking the BMA to scrutinize the new contract.

Share this post


Link to post
Share on other sites

Employment status for tax purposes is determined separately to employment status for employment rights purposes.

However, especially in light of recent cases, you would have a very good case for claiming workers' rights if your client has said that they consider you to be IR35 caught.  I know that IPSE are keen to support their members who want to pursue such cases, as would the unions.

However, if you're working via an umbrella, you become their 'employee' and those benefits are paid for out of your rate.  There is a danger that many clients or agents will insist that you work via an umbrella to pass on that responsibility.

Just yesterday Unite called for umbrellas to be outlawed as it allows employers to offload their responsibilities.    

http://www.unitetheunion.org/news/unite-demands-government-outlaws-umbrella-companies/

The lines between employed and self-employed are becoming increasingly blurred, and we're stuck with a 19th century tax system for a 21st century economy.   It's going to be an interesting few years!

Share this post


Link to post
Share on other sites
On 2/24/2017 at 17:54, littleteapot said:

Hi Jat

Your article says that the rules will apply to umbrella users.    Most locums using a standard umbrella structure will not be in scope.

See https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note#umbrella-company

"Where an umbrella company employs the worker directly and not through an intermediary, the new off-payroll rules do not apply. Some umbrella companies do not employ the worker directly and so this should be checked. If this is not the case then the normal rules apply. "

Thanks LittleTeapot I will have a look into it!

 

 

Share this post


Link to post
Share on other sites

Hi. The article has been amended to make it clear that workers who work through an intermediary for an umbrella company may be affected. http://www.medacs.com/ir35 Thanks!

Share this post


Link to post
Share on other sites

https://jumpshare.com/v/Et8z2DADOzCYGTJDFmHo

Interesting letter to NHS provider CEOs  

"HMRC will treat all public sector ‘self-employed’ contractors using a PSC as falling under IR35 and therefore treated for tax purposes as an employee"

is downright wrong - the client needs to make a determination.

Share this post


Link to post
Share on other sites

It's good to see this being discussed, I've tried in the past but people don't know about it. I locumed last year and was excited about working under a limited company but I really looked into IR35 and even got a specialist company to look into whether I could do it. There are clear rules and to be honest you'd really have to be bending them to do it as a doctor..

For example can you honestly say you work just for yourself with zero supervision whatsoever? Can you swing into work at 11am and leave early and everything is fine? Can you see patients as and when you please? Could you send a substitution in instead of you? Are you using your own computer? 

The answer to these will be no for almost everyone and this means you are inside IR35 and basically you're gambling on not being caught (they can go back 6 years and take all your unpaid tax from you). Its complex! You can even pay a company to insure you so that if you are IR35 caught they'll fight the case and cover your back taxes (they also refused to do this as they felt locum doctors were inside IR35). I ended up with PAYE despite my agency saying it was daft and everyone except me was limited company.

At least under the new changes the end client is responsible for the assessment so it's not down to us to make that call. But surely the end client is not going to risk it. Existing locums using a limited company are risking a retrospective investigation once they deem you inside of IR35 in April.

It's really going to make locums not worth doing anymore. Suddenly your "£45 per hour as a limited company" will be £30 per hour PAYE. Either that or it'll drive all the prices up. This is a shame as I was hoping to return to locuming after CCT.

Edited by Drachma21

Share this post


Link to post
Share on other sites

Just a little calculation, working as a Paye Consultant will get you around £60-65 /hr, working for 46 weeks a year  with full tax and NI you will be earning 5200 a month.

with no pension or any other employment benefits, most will prefer a NHS salary of 4500 a month will additional benefits.

I can see only few doing locums, those who really appreciate the freedom it provides.

Share this post


Link to post
Share on other sites

I'm hoping this discussion will turn into a solution focused one. 

I have a fair few thoughts and thought bullet pointing them might be better than rambling on. 

1. I've used tax avoidance scheme(s) in the past (Sanzar, Garraway and Winchester) and HMRC is coming down hard on these. The companies have closed up, and have set up alternate schemes. I was actually passed on from Sanzar to the others, and the same people run them all. HUGE tax bill to deal with. 

2. In view of the above, I'd suggest due diligence with umbrella schemes (EFTs were legal, and other tax loopholes were closed 7 years in retrospect! (Google BN66 and Montpelier). 

3. I doubt IR35 can be legal. Simply because you can't pay PAYE and say it's limited company, but you're still an employee without any perks. So it' sgood to hear of people following this up with unions (who are always ever so helpful *rollseyes*) and others. 

4. Its being left to individual trust to determine IR35 and I think locum's will go hell for leather for the ones that don't go with the IR35 shtick. 

5. If the goverment continues to fuck me about, I'm leaving for Oz or somewhere else. My Oz consultant bud was getting 2000 AUD a day for locum work. It's not all about money, but when the rest of the system is getting buggered like all get out too, hard cash can ease the pain a fair bit. 


Basically, be careful with umbrellas. Due diligence, hopefully people coming up with solutions here. Doubt it's legal but lets watch it play out - illegal or unconstitutional can pass along very peacefully where money saving is concerned. 

Edited by slartibartfast
1 person likes this

Share this post


Link to post
Share on other sites

+1 to this.  The only difference in take home with legitimate umbrellas should be the umbrella fees.   Any offering 85%+ take home are going to land you with a lot of sleepless nights.   People signing up for these schemes, all of whom were convinced by slick salesmen that the schemes were '100% compliant', 'QC Approved',  'HMRC compatible' etc are facing bills of hundreds of thousands.   If you're using an umbrella, use a standard reputable company.

More information at 'All Umbrellas are Equal'.

In terms of fairness, trade bodies such as IPSE have been making this point clearly, and will be backing members whose client have deemed them to be inside and want to claim employment rights.

Share this post


Link to post
Share on other sites

Any updates?

What are the benefits of using an umbrella company as opposed to just getting PAYE salary from the agency? The overall take home is the same.

Share this post


Link to post
Share on other sites

None - if you can go PAYE through the agency, then that's probably a better option than an umbrella.

Share this post


Link to post
Share on other sites
On 16/03/2017 at 10:53, slartibartfast said:

I'm hoping this discussion will turn into a solution focused one. 

I have a fair few thoughts and thought bullet pointing them might be better than rambling on. 

1. I've used tax avoidance scheme(s) in the past (Sanzar, Garraway and Winchester) and HMRC is coming down hard on these. The companies have closed up, and have set up alternate schemes. I was actually passed on from Sanzar to the others, and the same people run them all. HUGE tax bill to deal with. 

2. In view of the above, I'd suggest due diligence with umbrella schemes (EFTs were legal, and other tax loopholes were closed 7 years in retrospect! (Google BN66 and Montpelier). 

3. I doubt IR35 can be legal. Simply because you can't pay PAYE and say it's limited company, but you're still an employee without any perks. So it' sgood to hear of people following this up with unions (who are always ever so helpful *rollseyes*) and others. 

4. Its being left to individual trust to determine IR35 and I think locum's will go hell for leather for the ones that don't go with the IR35 shtick. 

5. If the goverment continues to fuck me about, I'm leaving for Oz or somewhere else. My Oz consultant bud was getting 2000 AUD a day for locum work. It's not all about money, but when the rest of the system is getting buggered like all get out too, hard cash can ease the pain a fair bit. 


Basically, be careful with umbrellas. Due diligence, hopefully people coming up with solutions here. Doubt it's legal but lets watch it play out - illegal or unconstitutional can pass along very peacefully where money saving is concerned. 

Hi

I came across this post when searching for info on Winchester tax avoidance scheme as I'm one of those caught with a huge tax bill after falling for the sales patter. Hindsight is great but retrospective taxation via the 2019 charge is just vile.

Do you know of any action groups that are dealing with this issue?

Share this post


Link to post
Share on other sites

i guess huge tax bills are paid by the savings in the company account.

Share this post


Link to post
Share on other sites

Afternoon all,

Hope you are well.

Now we are a couple of weeks in to the recent changes I was wondering if I could ask the question to gage the market re: the preferred payment route of locums? Have any locums remained with their PSC's or have you transitioned to PAYE or Umbrella?

For Athona we have seen a lot of migration to PAYE, which has surprised me as I envisioned Umbrella being the preferred route. As an agency we are still seeing the fall-out with a number of locums deciding not to work for a set period, but we are also seeing some positivity with some clients allowing enhanced rates to off-set some of the pay deduction being made.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now