The ink has yet to dry on Philip Hammond’s first budget as Chancellor but his proposed national insurance increases for the self-employed won’t take place as planned next year. His U-turn came within days of the Spring Budget as he was faced with a wall of objection from the UK’s self-employed whose numbers are estimated at some 4.7m.
It’s been a busy time on Whitehall as the long awaited Finance (No.2) Bill 2017 became law yesterday. Of particular interest have been the final rules that will apply to Public Sector freelance workers who offer their services to Public Sector Bodies (PSBs).
Up until now such workers have been able to offer their services to PSBs, invoice for work done via their own limited companies known as PSCs, then arrange remuneration that often means tax and national insurance paid is less than if that worker was employed by the PSB. HMRC see this as somewhat unfair and want to level the playing field. They also believe that tax take could increase by some £400m if PSCs effectively become PAYE employees of the PSB.
There has been consultation but the rules are now final and many PSCs operating in the Public Sector face a situation where their employment status will be determined by PSBs using an online tool provided by HMRC known as the Employment Status Service(ESS) or a third party IR35 assessment provider.
There had been talk of recruitment agencies that place the PSC workers in Public Sector roles playing a significant part in this employment status process, but late last week an amendment to the rules indicated that PSBs will become more responsible for IR35 determination than the agencies themselves.
Clarity regarding the rules for PSC workers in the Public Sector and how those rules will actually work in practice after 6th April will begin to unfold, but for now we know that there is much disquiet regarding the accuracy of HMRC’s online ESS tool.
Our tax enquiry and legal expenses cover (with the option to add a contract review) provides cover up to £1000,000 in the event you are investigation by the HMRC in relation to your IR35 status. Call 0333 321 1403 for details.