IR35 - notice for independent practitioners working for public sector bodies

From 6 April 2017 a change in tax law will affect you if you are an independent PR practitioner working for a public body through your own limited company, sometimes referred to as a ‘Personal Service Company’ .

IR35 Changes

These changes are being made under IR35 legislation, which ensures you pay the right amount of tax and national insurance. IR35 has also been called ‘disguised employment’ legislation. A disguised employee is someone who would be considered an employee were it not for the existence of the intermediary – in this case the worker’s limited company.

IR35 is designed to remove the tax advantage gained by those people seeking to disguise employment by operating through a limited company. In the public sector only, the responsibility for determining IR35 status has moved from the individual contractor to the client.

From April 2017 public sector organisations must now consider IR35 legislation and whether it should apply to each of their engagements. Where they decide IR35 should apply, they must deduct taxes as they would for their employees, through the Real Time Information (RTI) system. In short, payment to your company will be taxed at source, as if you were an employee. As a result, your company will receive a lower amount than it invoiced the client for, but you will not receive any of the rights or benefits associated with employment.

This will be the case whether you are contracted through your own intermediary or through a third party such as a recruitment agency. If there is an agency in the contractual chain, the client must inform the agency that pays the contractor of its IR35 determination. The agency must then decide whether or not to deduct tax at source. The agency doesn’t have to heed the determination made by the client, it can decide to ignore it and make its own assessment. :

The public sector includes bodies identified by the Freedom of Act definition, for the purposes of IR35 such as:

  • Government departments, executive agencies and non-departmental public bodies
  • NHS
  • Police and fire authorities
  • Local authorities
  • Devolved administrations
  • Educational establishments including universities
  • BBC, Channel 4
  • Bank of England

    If your client is not a public sector body, there is no change to current arrangements. In the private sector, under IR35, the agency doesn’t have to consider IR35 – the contractor does. If you are affected by these changes, you might seek advice from your accountant.

    For further information, please email philm@cipr.co.uk