Last Friday (3 February), HMRC published further guidance regarding off-payroll working in the public sector from 6 April. The update provided clarification that the responsibility of determining the IR35 status of a Personal Service Company (PSC) worker would lie solely with the hiring Public Authority.

If the Public Authority determines the PSC worker to be inside IR35, then the fee payer, such as a recruitment agency, will need to deduct the appropriate taxes and NICs before paying the Personal Service Company. It is also worth noting that although all decisions will be made by the Public Authority, the responsibility of reporting to HMRC through Real Time Information (RTI) and paying deemed direct payment to PSC will lie with the fee-payer.

A PSC worker can submit a repayment claim if they believe that they have been incorrectly taxed – HMRC will then determine if they are due a repayment of Income Tax or NICs and repay as appropriate.

HMRC also confirmed that where work has been completed before the 6th April, yet payment is made after 6th April, the rules will apply.

Summary of responsibilities:

  • Public Authority is responsible for deciding IR35 status of PSC worker.
  • Fee-payer is responsible for RTI, deducting NICs and taxes associated with the contract if the PSC worker is found to be inside IR35.
  • PSC worker to supply relevant information to the fee-payer with the details they need to help determine whether the off-payroll rules should apply, thus allowing them to deduct tax and NIC if the rule is applicable.

With the Employment Status Service Tool expected to be ready by the end of February, which will replace the existing Employment Status Indicator tool, interested parties will be able to use the service to help them obtain the HMRC view of whether any current and prospective workers would fall within the off-payroll rules from 6 April 2017.