Personal service companies in the public sector

HMRC are setting is clearly determined to come down hard on “off-payroll” workers i.e. self-employed and independent professionals. 

From April 2017, individuals working through their own company in the public sector will no longer be responsible for deciding whether the intermediaries’ legislation applies and then paying the relevant tax and NIC. This responsibility will instead pass to the public sector employer, agency or third party that pays the worker’s intermediary. The employer, agency or third party will have to decide if the rules apply to a contract and if so, account for and pay the liabilities through the Real Time Information (RTI) system and deduct the relevant tax and NIC.

HMRC has announced they will provide help for public sector employers and agencies with their new responsibilities. They plan to introduce clear, objective tests for employers to use to decide at the point of hire whether or not they need to consider the new rules and then identify those engagements that are caught by the rules.

For cases that are less clear cut, HMRC have announced that they will develop a simple digital tool. This will be designed to provide employers engaging an incorporated worker with a ‘real-time’ HMRC view on whether or not the intermediaries’ rules need to be applied.

However, public sector budgets are stretched and with austerity cuts, will it be possible for existing finance departments to assume yet another responsibility?  These departments already find it challenging to recruit and retain high caliber staff.  

Acqvalue believe that this will just make it harder, slower and more expensive to recruit staff and therefore put more strain on the public sector. Let’s wait and see.