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IR35 Explained for Self-Employed Contractors in the Public Sector

If you're self-employed and contracted within the public sector then the way you are paid is going to change
IR35 Scheme explained for self employed contractors in public sector

IR35 Explained for Self-Employed Contractors in the Public Sector

The government have recently introduced the IR35 scheme which has left many self-employed contractors within the public sector confused as to how they will now be paid. This article will explain what the IR35 means for businesses and how you will now be paid if you are contracted within the public sector for Councils etc.


What Does the IR35 Scheme Mean for Self-Employed Contractors in the Public Sector?

What the government want to do is basically get every contractor hired by public authorities to be paid in the same method as PAYE, in which employee deductions are taken directly from the amount before the contractor is paid, including general taxes and National Insurance contributions. Whereas before you quoted an amount and was paid that amount, you will now have tax and NI taken out of that amount before being paid.

In my humble opinion it’s just another government incentive to get more tax out of self-employed individuals and ensure you are unable to claim the usual expenses against the whole amount. Slight rant there, I won’t go on anymore otherwise we’ll be here all day!

IR35 was actually introduced back in 2000 but then it was the contractor themselves would decide if they would go onto the IR35 payment scheme or not. Now as of April 6th 2017 the public authority hiring the contractor makes the decision about putting their contractors onto IR35 and to simplify everything the government is head-strong on getting EVERY contractor on this payment method…so you don’t really have a choice in the matter. Sorry about that!


How will Self-Employed Contractors get Paid in the Public Sector?

Instead of being paid by BACS or cheque etc, you’ll now be paid like an employee and get a payslip with all your tax and National Insurance deductions already taken out. At the year-end you’ll receive a P60 with all the information on as to how much you were paid by that public authority and how much tax was deducted etc.

What this means is when it comes time to fill in your self-assessment tax return at year-end you’ll have to remember to fill out a separate SA102 (Employment) form to go with your standard SA100 Tax Return. This SA102 (Employment) form informs the HMRC of all the income you have received from that public sector job and ensures you aren’t taxed on it twice. You will need to complete a separate SA102 form for each public sector job you worked on unfortunately (I know, don’t get me started!).

If you forget to complete a separate SA102 form for each public sector job you were paid for, and add the total amount you earned into your overall income within your SA100 then you WILL be taxed twice on that amount! So please don’t forget to complete a separate SA102 form for every IR35 job you undertook in the year.


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