If you wish to engage an interim you must notify your Executive Head. Approval must be given by SLT prior to recruitment.
What is IR35 Tax Legislation?
IR35 is a piece of tax legislation which applies to people who supply their services to a client through their own company. The company is often known as a ‘personal service company’ (PSC) or a limited liability partnership. The IR35 rules affect the requirements for such workers in relation to tax payments and National Insurance Contributions (NICs).
Rules introduced to the public sector in April 2017 require all agency workers, contractors and consultants operating through a PSC or a limited liability partnership to engage with the Council in a decision making process about their status and whether or not PAYE and Employers NI should be deducted at source by the Council (or agency) (in the same way as for employees). This is to reduce scope for tax avoidance.
HMRC has released an online tool which contains a number of questions to help the Council and workers/contractors engaged via a PSC or a LLP to determine if they are within scope of IR35. It can be completed by both the Council, the agency and by workers/contractors and is available at https://www.gov.uk/guidance/check-employment-status-for-tax.
What does outside IR35/out of scope of IR35 mean?
This means that MVDC does not have to deduct tax/NI from payment for services. For this, a statement of work contract needs to be drawn up between MVDC and the interim. Please ask Legal for assistance.
How do I know what work is outside IR35/out of scope of IR35?
This is usually work that is outside the normal work performed within roles at MVDC. It might be a specific project or a piece of work that requires specialist skills. It is the project or output that is managed as opposed to the worker. There will normally be specific outputs from the project/piece of work, the worker will not come under our disciplinary, grievance, absence or performance management policies. There needs to be a clear end date to the work. It may even be possible for the consultant you engage to sub-contract with somebody else to do the work. The individual will often provide their own equipment, so should not need access to our ICT systems.
Any work that is claimed to fall outside IR35 must be checked by the hiring manager AND APPROVED BY THE RELEVANT EXECUTIVE HEAD/SLT. It is the employer’s responsibility to make the decision whether the work falls outside IR35 using the HMRC online tool. It is MVDC that will be liable if the decision cannot be evidenced.
The results of the test must therefore be discussed with the relevant Executive Head, and, if approved printed/retained by the manager and copied to HR. HMRC do not retain a copy of this information – the questionnaire is anonymous.
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Outside IR35 – steps
- Complete HMRC online tool
- Print results – copy to HR
- Statement of Work – Legal team to assist
- Notification of temp, consultant, contractor form to HR
- Code under CONSULTANTFEE
NB: If a worker falls outside IR35 they will not be expected to need ICT access
What does inside IR35/in scope of IR35 mean?
This means MVDC are responsible for ensuring that tax/NI is deducted by either MVDC or the agency if the interim has been found via an agency. They may still be paid via the agency to their own company.
You must ensure the agency is IR35 compliant for any interim roles that fall inside IR35.
How do I know what work is inside IR35/in scope of IR35?
This will be work that is normally carried out by staff at MVDC such as cover for an absence, where the workload has been unmanageable on a short term basis or there are difficulties recruiting directly to a role.
If you are unsure, the HMRC online tool can be used. Again, retain the results and copy to HR.
Inside IR35 – steps
- Complete HMRC online tool if unsure, print results and copy to HR
- Notification of temp, consultant, contractor form to HR
- Notify ICT via helpdesk
- Code under TEMPORARYFEES