IR35 and Off Payroll in the Public Sector

The Association of Professional Staffing Companies (APSCo) has responded to the publication of long-awaited final legislation on off-payroll working in the public sector.

From next month, public sector end clients will be responsible for determining the status of a contractor’s assignment to supply services through a Personal Services Company (PSC) or LLP, as outlined in the Finance Bill 2017.

The final legislation includes a new responsibility on public sector bodies to take ‘reasonable care’ when determining the contractor’s tax status and, consequently, they will become liable for covering taxes and National Insurance Contributions should HMRC decide that ‘reasonable care’ was not taken in making the decision. Under the draft legislation, the recruitment firms were saddled with this burden.

In addition, contractors now have a legal duty to notify recruiters whether she or he supplies services through a PSC, an LLP or through another individual and, in addition, Managed Service Companies now also fall within the Off Payroll rules.

Commenting on the final legislation, Tania Bowers, General Counsel at APSCo, says:

“After many months of consulting with Government on these Off Payroll public sector changes and the IR35 legislation, APSCo welcomes the decision that the liability to assess whether an engagement is akin to employment or self-employment ultimately does not fall on recruitment consultancies.”

“As we outlined in discussions both inside and outside of HMRC’s IR35 Forum, and in our official responses to the consultations, firms working with professionals in the public sector aren’t tax experts. They also have no visibility of how a role is undertaken on the client site, or indeed how the contractor runs his or her PSC or LLP and so are ill-equipped to determine tax status. The ‘reasonable care’ provision, which was dropped into the legislation at the eleventh hour, puts the onus back onto the client.”

“We also welcome amendments since the draft schedule which place an obligation on the contractor to prove their intermediary meets the conditions for Off Payroll to apply, further moving determination away from the recruitment profession.”

“While recruiters working with public sector organisations will, of course, have to be vigilant and compliant when placing PSC contractors, by questioning clients’ decisions, for example, it is a relief that the sector has not been lumbered with the administrative and financial responsibility of determining if engagement is inside or outside of Off Payroll. However, the professional recruitment sector continues to struggle with implementing a “deemed employment” payroll in time for the 6th April deadline, given software providers were not in position to start finalising changes until 20th March 2017.”

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