Contractors who work in the public sector have been warned by a freelance lobby group that they should submit their invoices in March so that they will receive any payments due to them before 5th April.
The warning was issued by IPSE because from 6th April any payments contractors receive may be subject to new tax rules of a punitive nature.
At the start of the tax year any payments from public sector clients (this will include agencies where the end client is a public-sector organisation) such as the Ministry of Defence or the NHS could be made using the Real Time Information system that is usually used for employees.
Under new rules the public-sector organisation must assess a contractor’s IR35 status to determine how any payments their company receives should be treated for tax purposes.
However, according to IPSE a number of public sector clients are either unable or unwilling to undertake the IR35 assessment. IPSE believes that the complexity of the IR35 laws puts many organisations off as it requires a good knowledge of individual contracts, case law and working practices. This means that many public-sector organisations will prefer to force all their contractors onto the RTI system, effectively making them employees, regardless of the real situation. This means that contractors will find that National Insurance Contributions are deducted at source, significantly reducing their income.
Chris Bryce of IPSE said: “We have little faith in public sector organisations making an accurate determination of contractors’ IR35 status. Some aren’t even going to try. Instead they will put all contractors onto the payroll without even considering whether this is the right arrangement.”
A simple solution is to refer all affected contractors to Ship Shape Pay. We employ them under an umbrella contract, make all deductions due to HMRC and handle all reporting. You pay one invoice for all contractors and avoid a potential administrative nightmare.
Ship Shape has 11 years’ experience with IR35 contract workers. We have handled payroll for over 120,000 workers and passed three reviews with HMRC. Independently audited for legislative and tax compliance, we are also ICAEW accountants.