Since 6 April 2017, the new off payroll working rules have changed the way the public sector engages contractors who provide services through personal service companies (PSCs) and other relevant intermediaries. The tax rule change has shifted the responsibility for determining whether or not the individual providing the services is an employee for tax purposes from the PSC/relevant intermediary to the public authority. If the determination is that the individual is an employee for tax purposes and the public authority is the ‘fee payer’ under the off-payroll working rules (i.e. it contracts with the PSC/relevant intermediary directly and not through a third party, such as an agency), the public authority must operate PAYE to deduct tax and National Insurance contributions at source from payments to the PSC/relevant intermediary. Our earlier blog post sets out further information on the new rules.
In its latest update published on 30 May 2017, NHS Improvement has revised its previous guidance to NHS providers that all locum, agency and bank staff should be put on the payroll. Their updated guidance recognises that this blanket approach was “not accurate” and emphasises that providers have a legal obligation to consider the individual circumstances of the person providing the services in each case.
NHSI advises that “an assessment of whether or not IR35 applies should be carried out in a fact-specific way; that is, it should be applied on a case-by-case basis, rather than by a broader classification of roles.” Such assessment must be fair, accurate and take into account all relevant factors, including representations provided by the individual concerned. NHSI expects providers to ensure that all locum, agency and bank staff are taxed appropriately following a careful assessment of their individual circumstances, in accordance with their legal obligations.
The guidance highlights HMRC’s online tool to help providers determine whether an individual should be considered employed for tax purposes (but points out that the tool does not negate the need for careful case-by-case scrutiny). You can access the link to HMRC’s tool here.
Do get in touch with Jog Hundle or Stuart Craig if you have any questions about complying with your IR35 obligations – as failure to correctly assess the worker contract (and/or comply with certain other obligations under the new rules) could result in additional tax liabilities for providers.