Public Sector Contractors must prove they are outside IR35

Public Sector Contractors advice
Public Sector Contractors advice

Public Sector Contractors

The Professional Contractors Group have come out with their assessment of the latest rules for Public Sector Contractors. They call these off-payroll engagees.

Do you remember that there was a leak which said that any contractor earning more than £220 a day (all IT Contractors) and who have been with the department for more than 6 months would have to register for IR35 or become an employee?

It looks as if there is a loophole if you can prove that you are at Low Risk of being inside IR35.

Government Department Contractors

The PCGs latest advice is for public sector contractors rather than just Government department contractors.

I don‘t know, however, if this is just a slip of the typewriter or not.

According to the PCG, after getting information from their members, there are several options for public sector contractors.

They have to provide information on their status to engaging organisations.

IR35 Options

They have to either:-

1. operate IR35 voluntarily
2. declare all their income from the contract as salary
3. provide evidence that IR35 does not apply either by using HMRC‘s confidential review service or by other means

Any Government department allowing contractors to operate outside these rules will be fined.

Business Entity Tests

The first step any public sector contractor should take is to take HMRC‘s IR35 Business Entity Tests.

Take it here – IR35 Test

You can use this as proof that you are currently at Low Risk of IR35 catching you. That’s if, indeed, you are.

The problem here is that most IT Contractors would be High Risk of being inside IR35 according to the current test.

IR35 Low Risk

IT Contractors should take some steps to make sure they are at Low Risk of being caught by IR35.

This test is just an indicator and not definitive. However, if you can show that you are at Low Risk to your department managers then they are unlikely to take it further.

You had better, therefore, get on with getting yourself outside of IR35. This is because you will have to provide evidence within 20 days of being asked for it by your department. So, it wouldn‘t look good if you suddenly got yourself to be Low Risk of being inside IR35.

Be prepared!

The other action you can take is to get your status reviewed by one of the firms who do contract reviews.

So, you can provide this assessment to your managers.

If you are not at Low Risk of being inside IR35 you can take steps to get yourself outside of it. you can then provide the new assessment from the firm.

HMRC are monitoring Public Sector contractors more closely.