Are contractors threatened by the new government procurement rules?

James Sheard discusses the consequences of new procurement rules for contractors.

The government uses contractors extensively, but whether they pay their fair share of tax has become something of a political hot potato.  To address this issue the Treasury has carried out a review of public sector contractors’ tax arrangements, advising that some new rules be established. They broadly say the following:

  • Senior staff should be on the payroll
  • They will be looking carefully at those people earning more than £220 a day for more than 6 months
  • Once 6 months has passed you must show compliance with IR35
  • IR35 is a section of tax law which states that if you behave like an employee and your contract is like that of an employee’s, you should be taxed like an employee

The full information relating to this change can be found at:

https://update.cabinetoffice.gov.uk/sites/default/files/resources/PPN-0712-Tax-Arrangements-of-Public-Appointees.pdf

Whilst these rules may add an extra level of inspection and administration, they don’t actually change the law.  They are merely aimed at catching people who are not currently compliant.  All the same, this may be relevant in terms of causing a trickle down; creating a trend whereby the company providing work for contractors will take more responsibility for ensuring IR35 compliance.  The Accountancy People would welcome such a change; we make sure all our clients consider IR35 before they start their contract and ensure that it is set up properly – this would simply ensure that everyone else takes the same care!

If you are unsure about your IR35 status please get in touch by calling 0161 303 0610, we can advise you whether your contract may be deemed inside IR35 and whether a review is necessary.

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