On 20 March 2017 the final legislation regarding the reform of off-payroll working rules in the public sector was released.
Since 6 April 2017, it is the responsibility of the public sector body and ‘engagers’ to apply the intermediaries’ legislation to applicable workers (namely those working through a PSC or other intermediary). The onus is on the public sector body to determine the status of a worker (historically this was down to the worker themselves). It is then the responsibility of the engager or agency to correctly apply PAYE tax and NIC, where applicable, before paying the worker.
To help engagers and agencies, HMRC confirmed that the public sector body will be responsible for determining a worker’s status on or before the worker enters into a contract. However, the agency will still be responsible for deducing the correct employment taxes.
To help with this the government has released its Employment Status Service (ESS), which you can read about further in my last blog, Recruitment Agents Beware. This test will help determine whether a worker is deemed to be ‘off-payroll working’ for tax purposes.
For contracts entered into before 6 April 2017, the public sector body needs to tell the fee payer prior to the first payment being made after 6 April as it is the payment that triggers the new rules, not the date at which a contract is entered into. If the public sector body does not do this then it will become the fee payer.
The worker also has a responsibility to notify the fee payer whether their intermediary meets the conditions of liability for IR35. If no notification is made by the worker, the fee payer will assume PAYE and NIC is to be applied.
This new legislation is going to place considerable burdens on agencies as they are ultimately responsible for ensuring the correct amount of tax has been paid by the worker. It will also affect those working through a PSC or another intermediary as they will no longer receive any financial benefit and may even be worse off.
With these changes now in force, it is important that those affected have processes in place to deal with the additional burdens. For further information or support regarding this new legislation, contact me at firstname.lastname@example.org.