Off-payroll working in the Public Sector.
On Wednesday the Chancellor announced that the government is pushing ahead with the legislation originally proposed in the April Budget. Meaning that, in most cases, the recruitment agency will be responsible for determining the employment status of each assignment for public sector workers using their own psc.
If the assignment falls within IR35 then the recruitment agency will also be responsible for making the calculations, deductions and payments for Tax, Employer’s and Employee’s NI, as they will be the ‘body’ paying the worker’s company. The government went one step further by removing the set 5% tax free allowance for the worker as administration has been simplified. At this time legislation and guidance is yet to be published. This is the relevant section in the statement:
‘Off-payroll working rules – Following consultation, the government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company. The government believes public sector bodies have a duty to ensure that those who work for them pay the right amount of tax. This reform will help to tackle the high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees. In response to feedback during the consultation, the 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply.’
VAT Flat Rate Scheme
A new Flat Rate of 16.5% has also been published which could affect limited companies who are made up of one, or a small amount of worker/s, supplying labour-only. This will apply within both public and private sectors:
‘VAT Flat Rate Scheme – The government will introduce a new 16.5% rate from 1 April 2017 for businesses with limited costs, such as many labour-only businesses. This will help level the playing field, while maintaining the accounting simplification for the small businesses that use the scheme as intended. Guidance which has the force of law, published today, will introduce anti-forestalling provisions.’
For more details on the implications and actions that will be required by recruitment agencies and the services we are able to offer then please click here. If you are a recruitment agency that thinks you will be affected by these changes and currently do not use EdenGroup then please contact one of our consultants on 01276 688050 for an informal, no obligation discussion to see how we can help you. Alternatively please email firstname.lastname@example.org
Existing clients of EdenGroup can be assured that we are here to assist in any transition required by both our agencies and their workers.
Click here for a full copy of the statement.