The government announced at Budget 2016 that it will reform the intermediaries (often known as IR35) legislation for public sector engagements to ensure that individuals who work through their own company pay employment taxes in a similar way to employees.
Here is a summary of the upcoming changes:
- Legislation will be introduced in Finance Bill 2017.
- Liability to pay correct employment taxes will move from the worker’s own company to public sector body or agency/third party paying the company.
- From April 2017, individuals working through their own company in the public sector will no longer be responsible for deciding whether the intermediaries legislation applies and then paying the relevant tax and NICs. This responsibility will instead move to the public sector employer, agency, or third party that pays the work’s intermediary. The employer, agency, or third party will have to decide if the rules apply to a contract and if so, account for and pay the liabilities through the Real Time Information (RTI) system and deduct the relevant tax and NIC.
- HMRC will introduce clear, objective tests for employers to use to decide at the point of hire whether or not they need to even consider the new rules and then quickly and decisively identify those engagements that are clearly caught by the rules.
- The existing intermediaries rules will continue as they are now for non-public sector engagements
- The new rules will apply to payments to intermediaries providing the services of a worker to a client in public sector.
Public sector will mean organizations that are Public Authorities for the purposes of the Freedom of Information (FOI) Act 2000 and Freedom of Information Act (Scotland) 2000 such as:
