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IR35 investigation on BBC presenters

Government committed to IR35 Reforms for Public Sector

The consultation document, ‘Off-payroll working in the public sector: reform of the intermediaries legislation’ isn’t due to close until 18th August but the Government have already indicated that their proposed reforms will go ahead next April as planned.

From April 2017, the government proposes to make public sector bodies and agencies responsible for operating the tax rules that apply to off-payroll personnel working through limited companies (also known as PSCs) in the public sector.

If there is no agency in the chain and the PSC contracts directly with the public sector body, then the public sector body is responsible for determining status. If there is one agency in the chain, responsibility passes to the agency. If there is more than one agency in the chain, responsibility passes directly to the agency that contracts directly with the PSC. If caught by IR35, the public sector body, agency or other third party will therefore be liable to pay any associated income tax and National Insurance.

The new rules are likely to impact teachers, local authority, social and care workers, NHS workers and all UK and local government workers providing their services via their own limited company.

Fears have arisen that many independent professionals will be deterred from working in the public sector as a result of these changes and that in the longer term the government may want to apply the new rules to the private sector as well.

The government estimates that around 26,000 personal service companies will be affected and acknowledges that some agencies will incur costs as a result of the requirement to operate payroll and gather information needed to assess whether IR35 applies.

Any hopes that the Government may rethink their proposals were abandoned when a statement in the Treasury Minutes last month confirmed that the new tax rules will apply, however they will consider whether its current public sector guidelines for ‘off-payroll’ limited company workers need amending prior to April 2017.

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