New law: Changes to IR35 rules due in April

Individuals working for public sector bodies through personal service companies should ensure they and the relevant body are ready for changes to IR35 due in April 2017.

Individuals doing work for public sector bodies through 'personal service companies' (PSCs), ie companies they have set up to trade through, must comply with new rules in relation to contracts they enter into and/or payments made to them from 6 April 2017.

IR35 legislation sets out tax rules which HM Revenue and Customs calls the 'intermediaries legislation'. They aim to stop individuals avoid tax by providing their services through a PSC/intermediary rather than as a direct employee.

Previously, if IR35 applied then the PSC had to operate PAYE and deduct National Insurance contributions on any salary or wages paid by it to the individual during the tax year.

Under the changes, the public sector client, agency or third party paying for the work is now responsible for doing these things. PSCs supplying services to the private sector will be unaffected.

Operative date

  • Now

Recommendation

  • Individuals working for public sector bodies through personal service companies should ensure they and the relevant body are ready for the changes to IR35 due in April 2017

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