IR35 reform and contracting in the public sector

[stuno1]

I am sure there are folk on here who contract in public sector companies and as such are working with the latest reform that is due to be rolled out to the private sector in April next year. I am yet to read anything about how companies have dealt with this in the public sector and how private sector are preparing for it.

How does it work for contractors? I have been reading the 'contractor calculator' site (https://www.contractorcalculator.co.uk) and it has been helpful with providing calculators on how earnings are impacted. I have also been following the cases of HMRC trying to claim back taxes from folk. Also, following the test HMRC uses and an understanding it is flawed etc

Looking at their 'off payroll IR35 calculator' based on 500/day a contractor will lose £331 a month under the new rules. That is not too bad. The bit I am keen to understand is how the public sector has dealt with employers paying NI and this apprentice fee thing! as this is a serious hit.

Example based on 500/day.
-Your client/agency ("fee payer") must also pay extra monthly Employers NI (13.8%) of £1,168 and monthly apprenticeship levy (0.5%) of £45 on top of your agreed contract rate. These additional annual employment taxes due by the hirer are £14,567

Stu

[stuno1]

No one???

[Tim330]

stuno1 said:

I am sure there are folk on here who contract in public sector companies and as such are working with the latest reform that is due to be rolled out to the private sector in April next year. I am yet to read anything about how companies have dealt with this in the public sector and how private sector are preparing for it.

How does it work for contractors? I have been reading the 'contractor calculator' site (https://www.contractorcalculator.co.uk) and it has been helpful with providing calculators on how earnings are impacted. I have also been following the cases of HMRC trying to claim back taxes from folk. Also, following the test HMRC uses and an understanding it is flawed etc

Looking at their 'off payroll IR35 calculator' based on 500/day a contractor will lose £331 a month under the new rules. That is not too bad. The bit I am keen to understand is how the public sector has dealt with employers paying NI and this apprentice fee thing! as this is a serious hit.

Example based on 500/day.
-Your client/agency ("fee payer") must also pay extra monthly Employers NI (13.8%) of £1,168 and monthly apprenticeship levy (0.5%) of £45 on top of your agreed contract rate. These additional annual employment taxes due by the hirer are £14,567

Stu

The client/agency will likely deduct the employers NI from your day rate. That's what makes this change so expensive.

[stuno1]

There is potential for that and in those instances I have heard of contractors simply being paid more to off set the extra tax. I was hoping some folk in here could offer some examples of how they have seen it working.

[robinessex]

See here

https://www.pistonheads.com/gassing/topic.asp?h=0&...

[stuno1]

robinessex said:

See here

https://www.pistonheads.com/gassing/topic.asp?h=0&...

Cheers. Interesting read. So basically all depends what the private companies do in terms of in or out. If in could increase day rate to compensate for additional tax and go through ltd company OR be paid to personal account via agency. If out all stays as it is.

[robinessex]

I'm wondering if any contractors have followed the LLP route ?

The partners in an LLP may also have a number of junior partners in the firm who work for them in the hopes of someday making full partner. These junior partners are paid a salary and often have no stake or liability in the partnership. ... Like an LLC, the LLP itself is a flow-through entity for tax purposes

[Mr Pointy]

robinessex said:

I'm wondering if any contractors have followed the LLP route ?

The partners in an LLP may also have a number of junior partners in the firm who work for them in the hopes of someday making full partner. These junior partners are paid a salary and often have no stake or liability in the partnership. ... Like an LLC, the LLP itself is a flow-through entity for tax purposes

How is that going to help a single contractor? He/she could work as an LLP (often done with the spouse as the other partner) but they would still be subject to the IR35 rules.

Are you suggesting that a bunch of contractors get together with some as junior partners? They are directed by the seniors so what happens if they don't like the job they get sent on?

[robinessex]

Mr Pointy said:

robinessex said:

I'm wondering if any contractors have followed the LLP route ?

The partners in an LLP may also have a number of junior partners in the firm who work for them in the hopes of someday making full partner. These junior partners are paid a salary and often have no stake or liability in the partnership. ... Like an LLC, the LLP itself is a flow-through entity for tax purposes

How is that going to help a single contractor? He/she could work as an LLP (often done with the spouse as the other partner) but they would still be subject to the IR35 rules.

Are you suggesting that a bunch of contractors get together with some as junior partners? They are directed by the seniors so what happens if they don't like the job they get sent on?

In relation to tax, however, a UK LLP is similar to a partnership, namely, it is tax-transparent. That is to say it pays no UK corporation tax or capital gains tax. Instead, LLP income and/or gains are distributed gross to partners as self-employed persons, rather than as PAYE employees. Partners receiving income and/or gains from an LLP are liable for their own taxation.

[Mr Pointy]

robinessex said:

Mr Pointy said:

robinessex said:

I'm wondering if any contractors have followed the LLP route ?

The partners in an LLP may also have a number of junior partners in the firm who work for them in the hopes of someday making full partner. These junior partners are paid a salary and often have no stake or liability in the partnership. ... Like an LLC, the LLP itself is a flow-through entity for tax purposes

How is that going to help a single contractor? He/she could work as an LLP (often done with the spouse as the other partner) but they would still be subject to the IR35 rules.

Are you suggesting that a bunch of contractors get together with some as junior partners? They are directed by the seniors so what happens if they don't like the job they get sent on?

In relation to tax, however, a UK LLP is similar to a partnership, namely, it is tax-transparent. That is to say it pays no UK corporation tax or capital gains tax. Instead, LLP income and/or gains are distributed gross to partners as self-employed persons, rather than as PAYE employees. Partners receiving income and/or gains from an LLP are liable for their own taxation.

But they would be hit by IR35 issues. I'm not sure how being an LLP helps if you are in an IR35-affected contract.

[Eric Mc]

IR35 applies to individuals operating through "intermediaries". A partnership can be an intermediary too.