Off-payroll working in the public sector

Before our brains switch fully to Christmas mode (I've already had two nightmares about sprouts), a quick flag for any public sector employers: from April 2017 it will be your responsibility to decide whether someone performing 'off-payroll' work for your organisation (ie a worker providing services through a personal service company, or through some other intermediary such as a partnership) is covered by the intermediaries tax legislation.

Currently, the responsibility lies with the relevant worker to account for any tax due on payments received. However, once the new regime is in place, effectively it will be up to public sector employers to ensure that the 'employed v self-employed' test is applied to each off-payroll worker and, if they are not genuinely self-employed, to deduct tax and NICs at source. Whilst the full legislation is yet to be published, HMRC has already issued guidelines on how tax and NICs will be accounted for in such situations, and if you need advice on this our Tax team would be happy to help.

In preparation for the change, organisations should put in place a clearly documented system for assessing off-payroll workers' status for the purposes of tax and NICs (or review any existing processes), and take steps to identify any existing workers who will need to be assessed. HMRC already provides an employment status indicator on its website (although it is worth remembering that this considers the issue purely from a tax perspective, rather than the wider employment rights perspective), and is in the process of publishing further guidance as well as (hopefully) an enhanced online tool to carry out such assessments.

Our experience with a number of clients suggests that it would also be worth conducting an audit of engagement / procurement practices across your organisations, to make sure that any managers / departments who may be engaging such individuals directly without central HR input are aware of the changes. Whilst the question of how liability for a failure to comply with the new provisions will be apportioned is still not clear, it seems sensible to assume that (in the absence of any misinformation from the individual) liability will lie at least partly if not wholly with the engaging organisations.