Off Payroll working in the public sector legislation

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Dear Customer,

Intermediaries legislation changes

From April 2017 there are changes to the way the current intermediaries legislation (known as IR35) is applied to off-payroll working in the public sector. Where the rules apply, people who work in the public sector through an intermediary will pay employment taxes in a similar way to employees.

Who the changes affect

These changes will be relevant to:

  • public authorities who hire off-payroll contractors
  • public sector tax managers, payroll managers, human resources managers and procurement managers
  • agencies and third parties who supply contractors to the public sector
  • contractors who provide their services to a public authority through an intermediary

When the changes will happen

The reform applies to payments made on or after 6 April 2017, including payments made for contracts entered into before that date. Where work is completed before 6 April 2017 but the payment is made on or after 6 April 2017, the rules will still apply.

How the reform works in practice

The responsibility for deciding if the legislation should be applied, shifts from the worker’s intermediary to the public authority to whom the worker is supplying their services.

Where the rules apply, the fee-payer (the public authority, agency, or other third party paying the intermediary) will calculate Income Tax and primary (employee) National Insurance Contributions (NICs) and pay them over to HMRC. These amounts will be deducted from the intermediary’s fee for the work provided.

For further information please refer to the HMRC website:

How can you prepare for the change

In readiness for the IR35 legislation reform, due to come into force on 6 April 2017, Crown Commercial Service is supporting its customers by outlining some key areas where you will need to consider action to ensure compliance.

Current workers on assignment pre 6 April 17:

  •  Public authorities must decide if current assignments fall inside or outside the scope of IR35.  HMRC has now released its Employment Status Service (ESS) tool to assist with decisions, which can be accessed at:
    Communications with agencies providing limited company contractors must be held to clarify the position of the role after 6 April 2017.  If the worker will remain in post after 6 April 2017, you will need to inform the agency through which they are engaged in good time, so that they can make any required changes to ensure compliance.
  • The agencies will communicate your decisions to their limited company contractors. For limited company contractors now classed as inside IR35, the agency will be expected to run a “deemed PAYE” scheme, deducting employer’s NI, employee’s NI, and tax from payments received from Trusts before remitting the remainder to the limited company.  Revised limited company contracts should be issued by the agency following any changes of status for the current role/assignment. For the sake of clarity, the existing capped rates set out in the NHS Improvement Agency Rules (and therefore the charge rates on CCS approved frameworks) for limited company contractors and umbrella company workers are deemed to be inclusive of all pay and tax elements; no rate increases for limited company contractors are intended as a result of the changes in IR35 legislation.
  • For limited company contractors outside of IR35, Trusts are advised to keep on file a PDF confirming that status from the HMRC ESS tool as evidence.

New assignments post 6 April 17:

  • All new roles and assignments post 6 April 17 should be identified as inside or outside of the scope of IR35 in advance of recruitment. This can then be communicated to the agency and potential candidates ensuring that IR35 compliance is met from the outset of the assignment.
  • Public authorities should consider the employment status rules outlined by HMRC when deciding on this matter; the relevant guidance can be found here:
  • Agencies should be informed of the status of any new roles/assignments and tax and payroll arrangements should be confirmed by the agency.

For any questions on the legislation please consult with HMRC via their guidance published at:

If you have any questions please contact your CCS Framework Manager at:


Crown Commercial Service