Staying in the same public sector contract after April 2017

[LondonManc]

Long time forum lurker here but I'd like to run my situation past you - if anyone has time to comment great.

Working in a Public Sector as limited company contractor. Been here 2.5 years now over 5 contracts on different projects. Current contract ends end of Feb and I was just going to leave it there. However been offered a 3 month extension. Not been claiming expenses since I started the contract that took me over two years.

No decision yet from the company whether they are going to declare people inside or outside but either way I think I have to leave either at the end of Feb or sign new contract and leave 31st March as agency said they will do an early payment run on 5th April if they have all necessary invoices etc on 31st March. Possibly finish a day early just to get this in on time.

Reason for not staying is if they declare all contractors inside then I fear retrospective action that I should have been inside all along. Or if company declare outside I think HMRC will have a smaller number to check on so could really scrutinise them and then face retrospective action.

So I'm thinking leave in March - company are fine with that as I've already mentioned it to them. Get paid before 2017/18 tax year starts. Then look for new contract in another company either public or private.

I know there is always a chance of investigation into past contracts but its too risky to stay on. I'm not leaving myself open to anything relating to the new laws commencing 6th April 17?

Say as little as possible until the last day of your current contract. That should give you another couple of weeks for them to establish a determination. As long as you're not afraid to walk and lots more follow suit, the situation should rectify itself in a few months anyway.

[philo]

And assuming the above is correct leaving on March 31st with a payroll on 4th/ 5th April is fine provided they meet that payroll date. It also gives them another month to determine if you are inside or outside and allow you to continue if outside..

Thanks for commenting. My take is that if its before April 5th then I can still declare myself outside?

[pscont]

Or if company declare outside I think HMRC will have a smaller number to check on so could really scrutinise them and then face retrospective action.

I know there is always a chance of investigation into past contracts but its too risky to stay on

Now that is absolute speculation. Not a fact.

And you contradict yourself in the next sentence.

I think some people here overreact a bit - try to make it as safe as possible in PS and don't worry too much. By safe I mean have a contract determined outside by the client and an agency that pays as now.

[philo]

Say as little as possible until the last day of your current contract. That should give you another couple of weeks for them to establish a determination. As long as you're not afraid to walk and lots more follow suit, the situation should rectify itself in a few months anyway.

Yes not signing new contract till I have some more info. I was expecting to leave in Feb anyway. The expectation is people will walk at end of March depending on when they can get paid

[londonlad]

What about VAT?

Just curious to know.

If HMRC deemed somebody inside IR35 and want to charge them tax and NI as employee. what will happen to all the VAT being paid to HMRC.

Does the company get VAT refund for the entire contract?

HMRC is in receipt of VAT because PSC is charging the end client. The end client here is the consumer of the service and therefore I guess can't claim back the VAT. HMRC will not have that income if they classify the contractor to be inside IR35 as employee don't charge VAT.

Anyone got any idea?

[eek]

Just curious to know.

If HMRC deemed somebody inside IR35 and want to charge them tax and NI as employee. what will happen to all the VAT being paid to HMRC.

Does the company get VAT refund for the entire contract?

HMRC is in receipt of VAT because PSC is charging the end client. The end client here is the consumer of the service and therefore I guess can't claim back the VAT. HMRC will not have that income if they classify the contractor to be inside IR35 as employee don't charge VAT.

Anyone got any idea?

Vat is irrelevant here. It is collected on behalf of hmrc and the contractor will continue to collect it on behalf of hmrc even if declared inside. The example I used on the FAQ of someone on £300 a day still has them receiving £300 a week in vat but only £910 (from memory) after tax is withheld

[b r]

It might be an idea every contractor who has served notice to drop a note to their MP pointing out why. As said in the previous post, the biggest issue for me is the removal of expenses. That ties me into local work, where the rates are dire. I'm not in the public sector, but still see this as being the fore runner to it being implemented in the private sector.

+1

I live in a very rural area and while my last contract was local I'm expect my next to require commuting at the very least, it not B&B etc.

Although you'll also find that MP's are less responsive to this issue as they feel hard-done-by with their expenses :-)

[eek]

+1

I live in a very rural area and while my last contract was local I'm expect my next to require commuting at the very least, it not B&B etc.

Although you'll also find that MP's are less responsive to this issue as they feel hard-done-by with their expenses :-)

Yep the fact they have to travel standard class on trains hit them hard....

[LondonManc]

Vat is irrelevant here. It is collected on behalf of hmrc and the contractor will continue to collect it on behalf of hmrc even if declared inside. The example I used on the FAQ of someone on £300 a day still has them receiving £300 a week in vat but only £910 (from memory) after tax is withheld

So in theory, the 60p a day that you'd collect from FRS would be used to pay a month or two of your accountancy and insurance fees that you'll still need to pay despite still being regarded as an employee?

[daemon]

So heres a question.

PSO decides your outside of IR35 and relays this message to Agency.

Agency continue to pay you via your PSC as previously.

There is nothing in the current legislation that puts legal liability on the PSO to absolutely have "got that right".

Other than the agency have to "accept" that determination, which they may be jumpy about doing as they are liable for any tax.

So surely a PSO can "short circuit" this all by determining people to be outside of IR35?