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Important IR35 changes to off-payroll working in the private sector

The Government and HMRC has confirmed new changes to off-payroll working (IR35) rules effective from 6th April 2020. This will affect any contractors working through a Personal Service Company, Recruitment Agencies, and all Large and Medium-sized end clients whose roles fall inside of IR35. These workers will be required to have tax and National Insurance Contributions (NIC) deducted from their income at source.

Although the client is solely responsible for determining whether or not your role falls inside or outside of IR35, we are here to support you through this process and answer any questions or concerns you may have.


We are taking robust measures to ensure the new legislation causes as little friction as possible. This includes:

  • Offering you ongoing access to PAYE, umbrella and PSC options where necessary to ensure you can select the right payment option for you

  • Working in close conjunction with our clients to investigate whether these changes will impact your take-home salary

  • Ensuring our teams have been trained sufficiently to get you the answers you need and can find you the best solutions based on your requirements

  • Working diligently to keep you well informed regarding all upcoming changes


For more information, please see our FAQs below, or speak to your Maxxima consultant.

FAQs

What is IR35?

The UK's IR35 legislation is a set of tax laws which are designed to ensure that contractors pay the same Tax and National Insurance contributions as an equivalent employee.. There are a series of tests used to determine the tax status of contractors working through personal service companies (PSCs).

IR35 is not a new set of tax laws. The 2020 reform will bring private sector IR35 in line with the public sector, where the reform was implemented in 2017. As of 6 April 2020, companies in the private sector will be responsible for determining the IR35 status of workers.

Only work completed on or after this date will fall under the new legislation. Anything worked up to and including 5th April will still apply under the old rules.

Who decides if I am in or outside of IR35?

The status of your role is determined by the client. This is assessed on a case by case basis by the hospital or client in question.


What happens if my role is inside IR35?

If your role falls within IR35, you will no longer be able to be paid gross into your PSC. Instead, you will be paid net with all applicable tax and NIC being deducted at source.

You can continue working via a PSC receiving net payments. However, if preferred, you can choose to be paid PAYE by Maxxima, or via an approved umbrella company instead.


How does IR35 affect my pay?

If deemed inside IR35, the applicable tax and NIC deductions will be done from the source and you will then receive your net pay. This means everything that arrives in your account is yours to spend without any further tax deductions.

After 6 April 2020 your rate may be displayed differently, your rate before this includes the element of employer’s NIC at 13.8%, which you would have been responsible for paying to HMRC up until 5 April 2020. After this date, if you are deemed inside IR35, Maxxima will make this payment directly to HMRC, therefore it no longer needs to be incorporated into your rate.

What will happen to my pension?

When working via a PSC, you are not eligible to be enrolled onto a pension. This is the case whether inside or outside IR35.

If you decide to change the payment method, the following will apply depending on the chosen method:

  • PAYE:You will be automatically enrolled onto our pension scheme after three months of
    working; you can opt-out if preferred, once enrolled.

  • Umbrella: Your chosen umbrella company will need to advise on their process for pension, however, you should be offered access to a pension scheme if you qualify based on pension legislation.

Why should I continue working through an agency?

Working through an agency offers a range of advantages over substantive or bank working. Even after IR35 considerations, you will still earn considerably more than your substantive equivalents (PAYE).

Benefits include:

  • Access to a wide range of opportunities across a large client base, including exclusive access to roles with our master vendor clients

  • If you are working PAYE you will receive access to benefits including sick pay and maternity/paternity leave

  • Flexibility on working hours, working locations, length of contract and type of work available

  • Regular payroll allowing for fast and flexible payments. As a leading healthcare recruiter, we can offer a full range of opportunities to you in addition to agency work including permanent and overseas opportunities.

Why should I not take bank shifts?

Staff banks can be less flexible in terms of payment, so you could be left waiting longer for your money than if you are working via Maxxima.

Staff banks often work collaboratively with other trusts potentially limiting opportunities both within other services in that trust, as well as opportunities in other linked trusts.

What happens to my work expenses?

You are still able to claim valid expenses under IR35. We advise you to work closely with your accountant who will be able to advise you on what can be claimed and how best to do so.

I would like to continue working as a limited company. What happens next?

We will advise you if your booking falls inside or outside IR35 once this has been established with the client.

  • Outside IR35: No change to you

  • Inside IR35: All payments made into your PSC on or after 6 April 2020 will have the relevant deductions made at source.

I want to work via an umbrella company, why is the pay rate different?

Working as a contractor means that you are not directly linked to the client, as there’s an intermediary in between – in this case, the umbrella company.

The umbrella company is essentially your employer, and therefore liable to pay employment taxes.

Due to this arrangement, the umbrella rate quoted to you will include 13.8% to cover the employer’s NIC, which the umbrella company will need to pay to HMRC for your employment. You will, therefore, be paid the equivalent PAYE rate after your umbrella company has taken this into account.

Should I opt for an umbrella company, PAYE or PSC?

These are all viable options for you. Working PAYE ensures that you are IR35 compliant and means you will be able to work in any trust. You will be entitled to sick and maternity/paternity pay where applicable.

If you are interested in working through an umbrella company, we recommend you speak with your consultant for more information on the umbrella companies on our Preferred Supplier List. If you opt to be paid via an umbrella company, you will be required by them to pay a weekly processing fee.

Your take-home pay should be very similar or the same whether you are paid PAYE, umbrella or PSC.

Irrespective of payment method, you will have access to daily payroll runs, support from our dedicated Sales Support teams and the ability to submit your timesheets digitally which speeds up the process of submitting your hours and reduces errors.

I want to move to PAYE. What do I need to do next?

Speak to our Support team who will be able to guide you. We will request bank details for your personal account rather than your company account and ensure that everything is in place in time for the changeover (6 April 2020).

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