Off payroll working (IR35) in the public sector ― overview

By Tolley

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Off payroll working (IR35) in the public sector ― overview
  • Applying the rules in the private sector
  • Overview
  • What is a public sector body?
  • Intermediary employers affected
  • Obligations of public sector body
  • Client-led status disagreement process
  • Implications for the intermediary
  • Implications for the worker
  • What happens where the intermediary is a partnership?

Following various reviews of the IR35 legislation (referred to as ‘the provision of services through an intermediary’ in legislation, and ‘off payroll working rules’ or ‘intermediaries legislation’ in HMRC guidance), the Government took a new direction in Finance Act 2017, treating public sector bodies which engage workers via an intermediary differently from any other end client of such engagements.

FA 2017, Sch 1

As from 6 April 2017, where a public sector body uses the services of an individual supplied by an intermediary such as a personal service company (PSC) or a managed service company (MSC), that public sector body and any other intermediary in the supply chain, such as an employment agency, have to consider whether the new public sector version of the IR35 rules apply. See Simon’s Taxes E4.1040.

ITEPA 2003, ss 61K61X
Applying the rules in the private sector

At the Budget 2018, it was announced that these rules will apply to large and medium businesses in the private sector from 6 April 2020. However, on 17 March 2020, the Chief Secretary to the Treasury, Stephen Barclay, confirmed that the Government is postponing the reforms to the off payroll working rules (IR35) from April 2020 to 6 April 2021. This will be done through an amendment to the Finance Bill and is in response to the ongoing spread of coronavirus (COVID-19) to help businesses and individuals. Mr Barclay was clear that this is a deferral, not a cancellation, and said that the Government remains committed to the reforms to ensure that people working like employees, but through their own limited company, pay broadly the same tax as individuals who are employed directly (see

More on Off payroll working in the public and private sectors: