IR35 and PSCs – Changes in store for the private sector?
Wed 16 Mar 2016
In their consultation document in the summer last year, the government estimated that non – compliance with the intermediaries legislation (commonly known as IR35), will cost the Exchequer £430m in tax and NICs receipts in the year and without reform, it expects this loss to continue to grow.
The Chancellor announced at Budget 2016 that it will reform the intermediaries legislation. Whilst these changes are specifically in regard to public sector engagements, the government has said that the ‘existing intermediaries rules will continue as they are now for non-public sector arrangement”.
In summary, effective from April 2017, where a PSC is engaged by an employer in the public sector, the PSC will no longer be responsible for establishing what is the ‘deemed payment’ under the rules under IR35 and paying employment taxes due to HMRC. This responsibility will instead move to the public sector employer, agency, or third party that pays the worker’s PSC. Therefore, where the public sector organisation engages directly with the intermediary, the public sector organisation will be responsible for operating the new rules and then collecting and paying the relevant tax and NICs and reporting these to HMRC through the Real Time Information (RTI) system.
We are expecting more details in the consultation document before the summer, but it would not be a surprise if a similar measure was introduced for private sector engagements so, watch this space…
Author: Vaneeta Khurana
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