IR35 changes for the public sector

Important changes to public sector contractors working under IR35 legislation have taken effect for 2017/18.

Individuals who work through intermediaries, such as personal service companies, are no longer subject to IR35 rules if they work in the public sector.

Public sector organisations or agencies paying off-payroll workers are now responsible for deciding whether the work falls within IR35. They must deduct income tax and national insurance (NI) if they deem the worker an employee within IR35.

Under previous rules, intermediaries were responsible for calculating and paying the contractor’s income tax and NI owed to HMRC.

The new rules apply to any payments made on or after 6 April 2017, including payments made for contracts entered into before this date.

These changes apply to the following:

  • public authorities hiring off-payroll contractors
  • public sector managers – tax, payroll, human resources and procurement
  • agencies who supply contractors to the public sector
  • contractors providing services to a public authority through an intermediary.

Impact on contractors

Contractors working with any of the following public sector organisations will no longer have their IR35 status determined by their intermediary:

  • government departments
  • the NHS
  • police and fire authorities
  • local authorities
  • educational institutions including universities
  • the BBC and Channel 4.

Contact us to discuss how these changes may affect you and your business.