IR35 – FAQs

Here, we detail more about what IR35 is and offer the answers to the most frequently asked questions we receive.

The Government and HMRC are implementing changes to the IR35 legislation. In 2017, this came into effect for those working for the NHS and other public bodies. However, as of 6 April 2021, this legislation is being introduced into the private sector, too.

Accordingly, this will impact candidates working via PSCs/limited companies whose roles fall inside of IR35. When the legislation comes into force, these workers will be required to have tax and National Insurance contributions (NIC) deducted from their income at source.

Whether or not your role falls inside or outside of IR35 is solely down to the client. However, we will do everything in our power to guide you through the process and address any questions or concerns you may have.

We are committed to helping you and as a result, we are:

  • Working with our private clients to determine if and how this will impact your take-home pay
  • Continuing to offer you access to PAYE, umbrella and PSC options where applicable to ensure you are able to choose the best payment option for you
  • Delivering robust training to our teams, ensuring we have the answers to your questions and can secure the best options for you
  • Dedicated to keeping you updated, with as much notice as possible, regarding all upcoming changes
  • For further information, please review our FAQs below, or speak to your consultant.

  • IR35 is a set of tax laws established by the government to combat “disguised employment”. There are a series of tests used to determine the tax status of contractors working through personal service companies (PSCs). If your contract has the same level of risk, responsibility and control as a permanent employee, you would be classed as inside IR35.

    IR35 is not a new set of tax laws. The changes due to affect the private sector come the 6 April 2021, have already been in place in the public sector since April 2017.

    As of 6 April 2021, 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.

  • The end client is responsible for determining the status of your role. This is assessed on a case by case basis, by the hospital or organisation in question.

    HMRC offer a complex test to determine status, which considers a number of factors when looking at an individuals contract, including:

    • Control – how much control does your client have over your working conditions?
    • Substitution – do you have a replacement to undertake your work in the event that you cannot fulfil your duties?
    • Mutuality of obligation – are you required to complete a specific task or is their scope for your client to ask you to perform additional duties?

  • If deemed ‘inside IR35,’ HMRC sees you as an employee and therefore subject to income tax and National Insurance, just as employees do.

    This means, if your role falls within IR35, you will no longer be able to be paid gross into your PSC. Instead, you will be paid the net sum 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 Pulse, or via an approved umbrella company instead.

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

    After 6 April 2021 your rate may be displayed differently. Your rate prior to 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 2021. After this date, if you are deemed inside IR35, Pulse will make this payment directly to HMRC, therefore it no longer needs to be incorporated into your rate.

  • 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 your 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.

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

  • 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 2021, will have the relevant deductions made at source.

  • 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 in to account.

  • 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, who have individually been audited to ensure adherence to legislation. 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 via our new timesheet app which speeds up the process of submitting your hours and reduces errors.

  • Speak to our sales 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 2021).

    Psychiatry – Sales support team
    AHP- Sales support team

  • Unfortunately, there isn’t a one-size-fits-all answer to this, as it depends on an individual’s circumstances and how their PSC is run. In theory, the tax should be the same, but running a PSC incurs other costs that PAYE wouldn’t. We would recommend you speak to your accountant and/or a financial advisor.