Fears that large numbers of contracting social workers in the public sector would be targeted by HMRC’s quest to abolish “false self-employment” have proven unfounded, the social care professionals’ news source Community Care reports. However, many of these workers will still be affected by tax changes announced in the March budget, the outlet warns.
Social workers contracting via personal service companies (PSCs) and Umbrella Companies face significant changes. The Chancellor announced in his budget that public sector organisations engaging independent social workers through PSCs will, from April 2017, be fully responsible for ensuring they pay the right level of tax.
PSCs such as limited companies enable individuals to take out their earnings as dividends, which are subject to significantly lower taxation rates than those applicable to sole traders or employees.
In the meantime, this spring the Government will begin a consultation on developing a “clearer and simpler set of tests and online tools.” Independent social workers operating in the private and voluntary sectors will be exempt from the changes.
According to Nicola Anderson, Head of Accounting at social work accountancy company Boox, it is unclear at this stage precisely how agency social workers operating in local authorities and the NHS would be affected – an issue that will not become measurable until after the consultation.
Ms. Anderson clarified that an independent social worker’s IR35 status is determined on a case-by-case or assignment-by-assignment basis, which is dependent on the contract they have with an agency or employer.
The CEO of social care recruitment company Caritas, Debbie Smith, who also chairs APSCo’s social work sector, cautioned that it would be “dangerous” for the Revenue to apply a broad-brush approach to IR35, as agency social workers undertake a very wide range of roles through a number of different vehicles, including PAYE, Umbrella Companies and PSCs.
One section of the locum social care workforce that will be immediately hit by tax changes from this month are those operating via Umbrella Companies. From 6th April, any Umbrella Company social worker who is deemed to be subject to “supervision, direction or control” (SDC) will no longer be able to claim tax relief on travel and subsistence (T&S) costs. For the many who travel long distances to temporary workplaces, this will mean a noticeable cut in take-home income.
Ms Smith, however, cautioned these professionals against a hasty stampede in the wake of these pending changes. The decision should not be based solely on tax, she said, but should be a rational, thought-out process.
She added: “You need to consider whether it’s best thing for you, as you’ll also have to look after your own holiday and sick pay, and so on.”