By
3rd May 2017

The new rules in relation to the liability to pay the correct amount of employment taxes for off-payroll workers came into force from 6th April 2017.

The off-payroll worker (a worker who is paid through a company they own – a Personal Service Company (PSC)) may no longer be responsible for establishing their relevant employment taxes due to HMRC. This responsibility may instead move to the public sector engager, agency or third party that pays the worker's PSC. Where a college, school or academy engages directly with the off-payroll worker, it may now be responsible for operating the new rules and then collecting and paying the relevant tax and NICs and reporting these to HMRC through the Real-Time Information (RTI) system.

Whether these new rules apply to the PSC in question is informed by a variety of factors based on the nature of the contract and the services they are providing to you. HMRC have a tool you should use to check employment status for tax to find out if the off-payroll working legislation applies to each person you engage via their own PSC.

In practice this will generally mean, for those off-payroll workers that the HMRC tool states the new rules apply too, where the College pays for the off-payroll workers services by invoice, PAYE and employee national insurance may need to be calculated and deducted from the payment of the invoice.

In terms of how this might affect your institutions procurement practices, you will no doubt be reviewing your contracts register and/or spend analysis to identify if you currently contract with any Personal Services Companies in order that these changes can be implemented. For example, you may engage with individuals to carry out hair and beauty demonstrations, employee engagement activities, curriculum advisors, examination officers etc. to whom these new rules might apply. You may well be involved in using the HMRC assessment tool to ascertain whether the regulations apply and contacting these individuals informing them of the changes and that their invoices will be paid after the relevant tax and NICs have been deducted.

It may also be necessary to review your processes in relation to setting up new suppliers to identify these types of contracts when awarded and to capture the information which will be required when using the HMRC assessment tool:

  • The worker’s responsibilities
  • Who decides what work needs doing
  • Who decides when, where and how the work’s done
  • How the worker will be paid
  • If the engagement includes any benefits or reimbursement for expenses

You may even decide to look how you procure these types of services to minimise the impact of these new regulations.

For those that work closely with their finance teams you may also be reviewing how the payment of taxes on behalf of these individuals might be administered through your existing payroll systems etc. and may be considering nominating an IR35 “champion” within your institution who then becomes the central point of contact on these issues.

If you have undertaken any of this activity and are willing to share your experiences, please email Regional Procurement Advisor, Jo Frost at j.frost@thecpc.ac.uk who can share them with the wider CPC membership community.

Agency Workers

Where an agency is engaged to provide more than one person, the Employment Status Service review should be carried out for each individual provided person. The agency should then be notified if off-payroll rules apply. It is your institutions responsibility to make the assessment. If assessments are not carried out and deductions from invoices do not take place (directly through your institution or via an agency) your institution will be responsible for the payment of PAYE and EES & ERS NICS.

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