New rules, introduced in April 2017 for public sector engagements, place the responsibility for deciding whether intermediaries legislation applies on the public authority, not on the individual worker’s intermediary.
The legislation, commonly known as IR35, ensures that individuals who work through their own company pay employment taxes in a similar way to employees, where they would be employed were it not for their personal service company (PSC) or other intermediary. The changes mean that public authorities now have responsibility for deciding whether employment taxes and National Insurance contributions (NICs) should be deducted from the gross payment due to the PSC.
Normally, the public authority will be the fee payer. However, where there is a further intermediary, or intermediaries, within the payment chain (positioned between the end client (the public authority) and the PSC), they will then become the ‘fee payer’. The fee payer makes the actual payment to the PSC.
Where there is this further intermediary who becomes the fee payer, there is no scope for this further intermediary to disregard the decision provided by the public authority end engager. The fee payer should deduct employment taxes and NICs in accordance with the public authority view.
The fee payer must be registered with HMRC as an employer and report payments and deductions via a Full Payment Submission, further guidance can be found here.
