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

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

The following Employment Tax guidance note Produced 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
  • Assess employment status
  • Communicate employment status
  • Client-led status disagreement process
  • Implications for the intermediary
  • More...

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 public sector version of the IR35 rules applies. See Simon’s Taxes E4.1040.

A report (Review of the changes to the off-payroll working rules) was published in February 2020 and has resulted in a number of tweaks to the rules from 6 April 2021 as well as confirmation of HMRC approaches to compliance with the rules.

Applying the rules in the private sector

From April 2021, these rules will apply to large and medium businesses in the private sector. From this date, there will be a number of tweaks to the rules that will apply to both the private and public sectors.

Overview

Normally, where a worker provides their services to an end client through an intermediary such as a PSC or an MSC, it is up to the intermediary to decide whether or not the worker would be an employee or office-holder of the client if the worker were engaged directly. If the worker would be an employee or office-holder (often referred to as being ‘caught by IR35’), then the PSC or MSC has to calculate the deemed employment payment which it is treated as making to the worker and it has to account to HMRC for income tax and NIC in respect of the deemed payment. For more on these rules, see the Anti-avoidance rules ― off payroll working (IR35) and MSCs ― overview guidance notes.

Where the end client is a public sector body, the decision as to whether the worker would be an employee or office-holder if engaged directly rests instead with the public sector body.

The responsibility for calculating a payment deemed to be made to the worker (the ‘deemed direct

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