The intermediaries legislation (known as IR35) has been in existence for many years and is well known by those affected by it. It ensures that individuals who work through their own personal service companies (PSC) pay employment taxes in a similar way to employees, where they would be employed were it not for the PSC or other intermediary that they work through.
However, due to concerns that IR35 is open to abuse and has not been effective in collecting all taxes due from such arrangements, the government has decided to adopt more stringent off-payroll workers rules for individuals working for public sector organisations through PSCs or their intermediary agents.
For all direct engagements between public sector organisations and PSCs, if the engagement falls within the intermediaries legislation conditions, income tax and NICs will need to be withheld by the public sector body at source through PAYE, and the relevant payment made to HMRC through RTI. In addition, the public body will also need to account for employer's NICs and any apprenticeship levy costs arising. If the engagement falls outside the intermediaries legislation conditions, the public body may pay the PSC or intermediary gross.
Where a public body engages a PSC worker through an intermediary agency, the public body will need to consider the intermediaries legislation and notify the agency whether income tax and NICs should be withheld from payments to the PSC at source.
- What do public bodies need to consider?
- What should public bodies do to get ready for the changes?
- What should intermediary agencies be doing in relation to public body engagements?
- What are the wider effects from IR35?