Off-payroll working in the public sector: reform of the intermediaries legislation

08 December 2016

 

As announced at Autumn Statement 2016 and following consultation over the summer, the government will legislate in Finance Bill 2017 to reform the off-payroll rules (often known as IR35) in the public sector. This was first announced at Budget 2016.

Responsibility for operating the off-payroll working rules, and deducting any tax and NICs due, will move to the public sector body, agency or other third party paying an individual’s personal service company (PSC).

Geographical extent - The change will come into effect from 6 April 2017 and apply to all four nations of the UK.

As a result of feedback received during consultation, the 5% tax-free allowance for general business expenses, available to workers currently applying the rules, will be withdrawn for PSCs working in the public sector. This will simplify administration and reflects the fact that PSCs no longer have responsibility for applying the rules.

Public sector bodies will be responsible for determining whether or not the rules apply and will be required to share this information with agencies in order for them to operate the rules correctly. To address concerns about acting in good faith on incorrect or false information, transfer of liability provisions will be introduced to provide protection. Public sector bodies in scope are those subject to the provisions of the Freedom of Information Act 2000 and the Freedom of Information (Scotland) Act 2002. The rules remain unchanged for the private sector.

Draft legislation (provision 1), a technical note/guidance, the summary of responses to the consultation and a TIIN have all been published.

The consultation on the draft legislation will run to 1 February 2017. Written responses should be sent to off-payroll.consultation@hmrc.gsi.gov.uk.