IR35 – The new Intermediaries Legislation form 6 th April 2017 “The Public Sector”

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The intermediaries legislation ensures that individuals who work through their own limited company pay employment taxes in a similar way to employees, where they would be employed were it not for the personal service companies (PSC) or other intermediary that they work through.

This new measure, “Off-payroll working in the public sector” moves responsibility for deciding if the off-payroll rules for engagements in the public sector apply from an individual worker’s intermediary to the public authority, agency, or third party paying the intermediary.

The measure makes that public authority, agency, or third party responsible for deducting and paying associated employment taxes and National Insurance contributions (NICs) to HM Revenue and Customs (HMRC).

This change does not affect workers who providing  their services to private sector organisations or where an agency directly employs a worker and it operates PAYE and NICs on earnings it pays to the worker.

Where a public authority, agency, or third party, “the fee payer” makes a payment to a worker’s intermediary on or after 6 April 2017, it decides if the rules apply, and then deducts tax and primary NICs from the payment it makes, and pays employer NICs all dealt with through the RTI system.

This new measure applies to payments on or after 6 April 2017 and so will affect contracts entered into before 6 April 2017 and operating after that date.

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