IR35 – off-payroll working in the public sector
From 6 April 2017 changes apply to the operation of the intermediaries legislation (IR35) for public sector bodies. From that date a public authority (as defined in the Freedom of Information Act) is obliged to carry out an assessment of the status of their contractors under IR35. If they are hiring direct and the contractor is within the IR35 legislation, the public sector body will become liable for PAYE deductions. If the contractor is supplied and paid through an agency, the agency becomes responsible for the deductions.
These new measures (‘off-payroll working in the public sector’) shift the responsibility for deciding if the off-payroll rules for engagement in the public sector apply, away from the contractor’s intermediary (or personal services company), to the public authority.
We have been helping a wide range of public sector bodies navigate their way through the IR35 requirements by fielding experts from our cross-disciplinary tax and employment teams. Some of the issues that have arisen are:
- Identifying where contractors are engaged by the organisation
- Making the IR35 assessment and using the online ESS tool
- Managing transition arrangements for those who are caught by the rules
- Liaising with the employment agencies and umbrella companies
- Adjusting contracts in the chain
- Formulating a policy for managing contractors
- Designing a contractor take-on process
- Stakeholder management across procurement, legal and HR
- Analysing the employment law implications of changes to terms of engagement.