Off-payroll working in the public sector – information for agents
30 April 2019
An update has been made to the agent's guide on off-payroll working in the public sector to clarify how the accounts of intermediary Personal Service Company should be prepared.
The amendment adds to and updates an earlier Technical Note published at Autumn Statement 2016. It is intended to help agents and others providing advice to contractors who carry out work for a public authority client whilst working through an intermediary (normally their own company) or a Managed Service Company (MSC). The main focus of the note is the implications for Personal Service Companies (PSCs) but the same rules will generally apply where the intermediary is an individual or a partnership.
The update is within section 13 as follows:
Accounts of the intermediary PSC
HMRC will accept accounts that have been prepared under either a gross or net receipt basis since the tax result is the same. But preparers of the accounts will need to consider the most suitable approach to ensure the financial statements are prepared in accordance with UK GAAP.
The example above (section 8) uses a net accounting method. The net amount is the amount remaining after the tax and NICs have been deducted. From an invoiced amount of £7,200, the fee payer would pay an amount of £5,329 to the PSC. This included an amount of VAT (£1,200) so the corporate accounts would reflect the VAT exclusive amount of £4,129 in the calculation of turnover for Corporation Tax purposes.
Under a gross accounting method, the gross amount before tax and NICs is accounted for as turnover, and the PSC will have an expense debit to write off a part of the debtor balance that it will not receive. Using the figures in the above example again, the corporate accounts would reflect the VAT exclusive amount of £6,000 in the calculation of turnover for Corporation Tax purposes. A write off of £1,871 would be needed in the accounts to reflect the income tax and NICs deducted by the fee payer.
For full details, see - Off-payroll working in the public sector: reform of the intermediaries legislation - information for agents