Hi all,
(this is a long one, please bear with me!) I just wanted to get some other thoughts on this.... I was contacted recently for a contract for a public sector client (via an agency), who sent out the job spec and another lovely file about "IMPLEMENTING THE RECOMMENDATIONS OF THE HMT REVIEW OF TAX ARRANGEMENTS OF PUBLIC SECTOR APPOINTEES"
This lists, among other things, that "All new contracts and any contract renewals (of more than 6 months or £220 per day) will include new contractual clauses that give the Authority the contractual right to seek assurance that the Off Payroll Worker (“worker”) is meeting their income tax and national insurance obligations. Failure to provide sufficient assurance will mean the Authority terminates the contract" - so one (or more) of the following needs to be completed:
Route 1: Carry out the Business Entity Test -
The Business Entity Test is a series of questions that have been designed by HMRC. A score is associated with each answer to each question. The total score of the business entity test indicates the company’s risk of being investigated under IR35; high, medium or low. If you score medium or high risk you shall have to proceed to Route 2.
Route 2: Carry out an Independent Contract Review
If you score medium or high risk according to the business entity test but feel you are outside the scope of IR35, then you can provide assurance by conducting a contract review with HMRC or an independent IR35 specialist advisor (this must not be your own accountant). The contract review will determine whether your contract is in scope of IR35. If your contract is deemed to be out of scope, as long as you can provide evidential documentation of this then no further action is required as long as the terms of the contract remain the same for the duration of the contract. We can support your contract review process by providing you with a Confirmation of Working Arrangements form.
If the contract review deems the contract to be in scope, you will need to proceed to Route 3.
Route 3: Carry out a Deemed Payment to HMRC
If your contract is within the scope of IR35, you can provide evidence that you are operating the IR35 legislation on payments received from the Authority. This can be evidenced by providing a deemed calculation, which requires you to consider all the income for the year from your particular contract that is within IR35, then make a deemed payment to HMRC for employer NICs and pay employees NICs, and PAYE on the remainder of the income.
If you choose this option as a method of assurance to the Authority you will need sign a document with your intention to make a deemed payment, and you will need to prove by no later than 19 May annually that you have made the deemed payment to HMRC for the relevant tax year with a cover letter from HMRC. If this is provided, you can continue to engage with the Authority but will need to go through one of the assurance processes the following year.
Failure to provide assurances will result in termination of the contract
-----
Maybe its just me, and maybe I'm just being a bit touchy, but is how I set up my company and deal with HMRC in regards to mine and my company's taxes a matter between me, my accountant and the HMRC? Please tell me if I'm way off base here!
(this is a long one, please bear with me!) I just wanted to get some other thoughts on this.... I was contacted recently for a contract for a public sector client (via an agency), who sent out the job spec and another lovely file about "IMPLEMENTING THE RECOMMENDATIONS OF THE HMT REVIEW OF TAX ARRANGEMENTS OF PUBLIC SECTOR APPOINTEES"
This lists, among other things, that "All new contracts and any contract renewals (of more than 6 months or £220 per day) will include new contractual clauses that give the Authority the contractual right to seek assurance that the Off Payroll Worker (“worker”) is meeting their income tax and national insurance obligations. Failure to provide sufficient assurance will mean the Authority terminates the contract" - so one (or more) of the following needs to be completed:
Route 1: Carry out the Business Entity Test -
The Business Entity Test is a series of questions that have been designed by HMRC. A score is associated with each answer to each question. The total score of the business entity test indicates the company’s risk of being investigated under IR35; high, medium or low. If you score medium or high risk you shall have to proceed to Route 2.
Route 2: Carry out an Independent Contract Review
If you score medium or high risk according to the business entity test but feel you are outside the scope of IR35, then you can provide assurance by conducting a contract review with HMRC or an independent IR35 specialist advisor (this must not be your own accountant). The contract review will determine whether your contract is in scope of IR35. If your contract is deemed to be out of scope, as long as you can provide evidential documentation of this then no further action is required as long as the terms of the contract remain the same for the duration of the contract. We can support your contract review process by providing you with a Confirmation of Working Arrangements form.
If the contract review deems the contract to be in scope, you will need to proceed to Route 3.
Route 3: Carry out a Deemed Payment to HMRC
If your contract is within the scope of IR35, you can provide evidence that you are operating the IR35 legislation on payments received from the Authority. This can be evidenced by providing a deemed calculation, which requires you to consider all the income for the year from your particular contract that is within IR35, then make a deemed payment to HMRC for employer NICs and pay employees NICs, and PAYE on the remainder of the income.
If you choose this option as a method of assurance to the Authority you will need sign a document with your intention to make a deemed payment, and you will need to prove by no later than 19 May annually that you have made the deemed payment to HMRC for the relevant tax year with a cover letter from HMRC. If this is provided, you can continue to engage with the Authority but will need to go through one of the assurance processes the following year.
Failure to provide assurances will result in termination of the contract
-----
Maybe its just me, and maybe I'm just being a bit touchy, but is how I set up my company and deal with HMRC in regards to mine and my company's taxes a matter between me, my accountant and the HMRC? Please tell me if I'm way off base here!
).
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