HMRC have announced the reforms to the intermediaries’ legislations (IR35: is tax legislation that is designed to combat tax avoidance by workers supplying their services to clients via an intermediary, such as a limited company, but who would be an employee if the intermediary was not used). Such workers are called ‘disguised employees’ by Her Majesty’s Revenue and Customs (HMRC) for public sector bodies in the Budget 2016, which is set to come into force from April 2017. As briefed in the Autumn Statement
Off-payroll working rules – Following consultation, the government will reform the off payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company. The government believes public sector bodies have a duty to ensure that those who work for them pay the right amount of tax. This reform will help to tackle the high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees. In response to feedback during the consultation, the 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply.
These changes are set to have a significant impact on how we process payment for those workers operating through a PSC. Please contact your placement officer to discuss further.