What are off-payroll working rules?

The rules for individuals providing services to the public sector via an intermediary such as a personal service company (PSC) changed from April 2017. The rules, known as off-payroll working rules shift the responsibility for deciding whether the intermediaries’ legislation applies, known as IR35, from the intermediary itself to the public sector receiving the service. The public sector will also be ultimately held responsible for paying taxes and penalties where an error has occurred.

The provisions apply when a worker personally performs services or is under an obligation to personally perform services for a public sector client. In addition, the worker must be providing the services via an intermediary (usually a PSC) and the services must be such that if the contract had been directly with the client, the worker would be regarded for Income Tax purposes as an employee of the client.

Planning notes

There are a number of scenarios that fall outside the scope of the reforms. For example, there is separate guidance where an agency directly employs a worker supplied to the public sector and PAYE and NIC is deducted. The rules do not apply where a public authority has fully contracted out services to a service provider and the workers do not personally provide their services to the client. However, the off-payroll rules may apply if an agency, umbrella company or similar third party supplies a worker by engaging the worker's intermediary.


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