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 but rather the public sector employer, agency, or third party that pays the worker’s intermediary will be. The employer, agency or third party will have to decide if the rules apply to a contract, and, if so, account for the pay the liabilities through RTI and deduct the relevant tax and NIC.
The new rules will apply to payments to intermediaries providing the services of a worker to a client in the public sector. Public sector will mean organisations that are Public Authorities for the purposes of the Freedom of Information Act 2000 and Freedom of Information Act (Scotland) 2002 and includes Government departments, Legislative bodies, the armed forces, local government, the NHS, schools, the police and the BBC.
To work out the correct amount on which to pay tax and NIC, the engager will need to calculate an amount of deemed employment income i.e. the payment made less any VAT charged and a 5% deduction. The engager will operate all expenses and other allowable deductions and allowances as if this were a normal direct employment. Responsibility for paying employers’ NIC will also shift to the engager.
Off-payroll working in the public sector; reforming the intermediaries legislation Technical Note 16th March 2016