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Off-payroll working in the public sector

24 March, 2017

Author: David Goulds, Director of Finance and Operations


In the Autumn Statement last year, the government confirmed its intention to reform the intermediaries legislation set out in Chapter 8 Part 2 of the Income Taxes (Earnings and Pensions) Act 2003 (ITEPA 2003), usually referred to as IR35.

These changes are now before parliament in the Finance Bill 2017 but NHS employers have been active in preparing for the implementation on 6 April 2017 for some months and we have received a number of enquiries from members concerned at the implications.

HM Revenue and Customs have produced a Technical Note on the changes.

This runs to 31 pages and in view of the complexities involved in this area of taxation legislation, plus our current understanding of how NHS Trusts are approaching the operation of the new rules, we are currently working on a summary advice note to which members can refer that will provide general guidance on the key points. 

The objective of IR35 is to ensure that individuals who work through their own company, or one of the other relevant forms of intermediary, pay employment taxes in a similar way to employees in situations where they would be regarded as employed, were it not for the presence of the personal service company, or other intermediary that they work through.

The changes to IR35 from 6 April move responsibility for deciding if the new off-payroll rules for engagements in the public sector apply from an individual worker’s intermediary, to the public authority, agency or third party paying the intermediary.

Under the rules, the NHS is defined as a public authority and, as such, is responsible for ensuring that employment taxes and national insurance contributions associated with these engagements are deducted and paid to HMRC. 

Our understanding is that in making their decisions, NHS trusts, in their capacity as the client paying the fee for the worker’s services, must inform the intermediary, agency or third party with whom they have a contract for the services of the worker to be provided, whether the particular contract falls within these new off-payroll rules or not.

If the NHS trust does not notify the intermediary, agency or other third party of the status of the worker then they may request in writing that the NHS trust provides the necessary information.

The NHS trust client can also be asked by the person they have contracted with about the reason for reaching the conclusion they did.

On this last point, it would be very helpful if any member who has asked for a written explanation from their trust as to why they have been deemed as now coming within the scope of IR35, if they could forward details of any response to me in confidence.

In conclusion, we would stress to members affected by these changes that we are aiming to provide our summary briefing as quickly as possible.

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