In the public sector, are consultants required to work via an umbrella company?

New HMRC rules now govern the public sector resulting in a change to the way contractors must operate in this sector

Wherever or however you work, even as an independent professional, HMRC expect you to be on a payroll somewhere. HMRC might expect you to be treated as an employee of your client, or possibly of your agency, but since this does not suit either of these parties, the only alternative is to be an employee of your own company, or of a payroll umbrella company.

Independent professionals working in the private sector are required to work via a limited company. Until April 2017, this was also true for the public sector, but new HMRC rules now govern the public sector resulting in a change to the way consultants must operate in this sector.

Before the ‘Off-Payroll Working’ rules were instated in April 2017, public sector workers were responsible for reviewing their own contracts and determining their IR35 status. Now, in this sector, it is the client that is responsible for determining the IR35 status of the contract. Public sector contracts will be expected by HMRC to default to IR35 status unless there is a very good reason to do otherwise, and of course, there is always the risk that HMRC will investigate those contracts that don’t.

Therefore, many more public sector contracts will fall under IR35, and if your contract is one of them, we recommend that you look into working via an umbrella company.

Working in the charity/not-for-profit sector

These rules also apply to certain organisations in the charity/not-for-profit sector, as well as to the public sector. If your client is subject to the Freedom of Information Act (2000), these rules will apply.