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IR35 and the public sector
17/05/2017

The rules for individuals providing services to the public sector via an intermediary such as a personal service company (PSC) changed from April 2017. The new rules shift the responsibility for deciding whether the intermediaries’ legislation applies, known as IR35, from the intermediary itself to the public sector receiving the service. The public sector will also be ultimately held responsible for paying taxes and penalties where an error has occurred.

The new provisions apply when a worker personally performs services or is under an obligation to personally perform services for a public sector client. In addition, the worker must be providing the services via an intermediary (usually a PSC) and the services must be such that if the contract had been directly with the client, the worker would be regarded for Income Tax purposes as an employee of the client.

HMRC has published guidance to help public authorities, employment agencies, and other third parties who supply labour to identify if the contracts they have are within the scope of the changes. This guidance has been updated to clarify how off-payroll working in the public sector rules apply to businesses that provide ophthalmic and pharmaceutical services.

There are a number of scenarios that fall outside the scope of the reforms. For example, there is separate guidance where an agency directly employs a worker supplied to the public sector and PAYE and NIC is deducted. The rules do not apply where a public authority has fully contracted out services to a service provider and the workers do not personally provide their services to the client.

These changes are having an enormous impact on the way agency services are provided across the public sector especially in the NHS, local councils, education establishments and the police.


Contact Us

Poole Office

Tower House, Parkstone Road
Poole, Dorset
BH15 2JH
Tel: 01202 678555

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Company Registration No: O7430971
VAT Registration No.107585703

Wimborne Office

Beaufort House, 2 Cornmarket Court
Wimborne
BH21 1JL
Tel: 01202 849169

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