Off-payroll working - Changes to tax legislation (IR35)

Published
07.04.2017

The government has introduced amendments to existing legislation regarding off-payroll working in the public sector - also known as Intermediaries legislation (IR35) which came into effect from 6th April 2017. All public sector bodies including schools and academies have a responsibility to ensure the people working for them are engaged appropriately, you will therefore need to put into place the appropriate steps to ensure compliance with the legislation.

Further information about the legislation can be found at Off-payroll working in the Public Sector

What does the school have to do now?

  • Review all existing worker arrangements that are in place within your school.
  • The legislation does not apply to staff directly employed by the school as they are already being paid via payroll and have the appropriate level of tax and NI deducted.
  • If you have any other workers you will need to complete the HMRC tool and take the appropriate actions depending on the outcome.
  • If you have workers supplied via an agency contract we suggest you discuss a joint approach with the agency to completing the tool, recording the outcome and taking the appropriate pay related actions. GCC for example, have an arrangement with a neutral vend supplier and have agreed we will complete the HMRC tool, they will store the results on their online compliance system and if the outcome means that tax and NI should be applied they will notify the worker’s agency who will then make payments and relevant deductions via their own payroll arrangements.

 HMRC categories

The HMRC online tool asks questions which you should complete in conjunction with the worker (as they may need to supply information regarding their status). The outcomes are:- 

  1. This engagement should be classed as employed for tax purposes.
  2. The intermediaries legislation applies to this engagement.
  3. The intermediaries legislation does not apply to this engagement or This employment should be classed as self-employed for tax purposes.

Your next steps depend on who provides your payroll and who processes your invoice payments. If you purchase payroll services from GCC please see the IR35 – An easy guide

If GCC do not provide your payroll you will need to liaise with your provider to ensure compliance with the legislation.

Deemed payment via payroll.

What happens in the Future?

The legislation applies to payments made on or after 6th April for existing arrangements and new contracts entered into after this date.

Your responsibility

A quick reminder – it is your responsibility to:-

  • Ensure compliance with the legislation.
  • Complete the HMRC on-line tool process for all workers who are not directly employed by you.
  • Record the outcome of the HMRC tool and retain a copy for your records should it be required for audit purposes in the future.
  • Ensure workers who are assessed as either ‘Classed as employed for purposes of tax’ or ‘Intermediaries legislation applies’ are paid via payroll arrangements so that tax and NI are deducted and that the HMRC starter checklist is completed and a copy retained for future audit purposes.
  • That the process is followed for workers engaged via an Employment agency – it is your responsibility, not the agency’s.
  • That for workers who are assessed as “intermediaries legislation does not apply” you have evidence of the HMRC outcome before processing any invoices for payment.

The impact of non compliance is that the school may be liable for unpaid tax, NI and related interest and penalties.

Who Do I Contact for more advice?

If you purchase GCC payroll service and have queries about the payroll process please e-mail contactus@gloucestershire.gov.uk or ring 01452 425888 (Option 2, then Option 3 then Option 1)

If you purchase GCC HR service and have queries about the employment implications please email contactus@gloucestershire.gov.uk or ring 01452 423888 (Option 2 then Option 4)

 

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