IR35 changes for public sector workers: a brief summary

 

What are the new rules?

Recruitment businesses have been burdened with a whole raft of new responsibilities in recent years due to a range of new legislations, which simultaneously tightened-up on employment rights and attempt to tackle instances of tax avoidance by contract workers. The latest in this series of changes are amendments to the way in which the intermediaries legislation (IR35) is operated in the public sector.

The amendments will see responsibility for determining IR35 shift from the PSC itself over to the public sector body, in instances where it is determined that IR35 applies, the entity paying the PSC (the “fee payer”) will be required to deduct appropriate amount of income tax and Employees National Insurance before paying the PSC, as well as account for Employers National Insurance (and the Apprenticeship Levy in scenarios where it has a total pay-bill in excess of £3m per year). These changes to IR35 will have significant consequences for recruitment agencies that place PSC candidates into the public sector, since in most cases it will be the agency that carries these responsibilities of being the “fee payer". For the agency to be able to carry out these responsibilities correctly, it may require additional investment in staff, staff training, and infrastructure (payroll software etc.).

As a response to the legislation changes, Liberty Bishop has developed an innovative new labour engagement model which allows us to remove these new liabilities from recruitment agencies entirely. Through our new labour engagement model, Liberty Bishop will be the entity that takes on the responsibility of being the “fee payer”. This means that Liberty Bishop will take ownership of the requirement to carry out deemed salary deductions and will also hold liability for the payment of Employers National Insurance and any Apprenticeship Levy liabilities. We will also carry the responsibility for (re)assessing the IR35 status of the PSC in those instances where the information supplied by the public sector client is incomplete or suspected to be incorrect.

In brief our labour engagement model provides the following benefits to a recruitment agency:

  • Alleviates the agency of its new responsibilities under the proposed changes to IR35 in the public sector
  • Streamlines agencies payroll function
  • Streamlines agencies HMRC reporting requirements

If you would like to find out more about Liberty Bishop’s labour engagement model and how we can help your business stay compliant and risk-free, please don’t hesitate to contact our business development team.