Skip to main content

Off-payroll working – new rules less onerous

Blair Adams

The draft new legislation on off-payroll working in the private sector has pulled back from the regime described in the government consultation earlier this year.

Published in early July, the proposed legislative framework will make end-user clients responsible for the tax and NICs on fees paid to contractors via intermediary entities if they fail to issue a status determination statement.  This contrasts with the proposal during the consultation phase to make clients responsible in all cases where there is a deemed employment relationship.

The status determination statement must set out whether the client considers there to be a deemed employment relationship with the individual contractor, notwithstanding the existence of intermediaries in the supply chain between the two parties.

Under the proposed rules, the client will still be responsible for making the status determination.  However, it can avoid tax liabilities by issuing the statement to the next person in the chain. The last intermediary in the chain to receive the statement will be responsible for tax and NICs. In many cases this will be a personal service company or a recruitment firm, but it could equally be an “umbrella” company that exists purely as a vehicle for engaging contractors. The client must consider any challenge to its status determination within 45 days.

This is to be contrasted with the regime that now operates in the public sector, where the off-payroll working rules introduced in 2017 made the client responsible for paying tax and NICs where it determined there to be a deemed employment relationship.  However, the government appears to lack the desire to apply the same principle to the private sector.

Clients in the private sector will still need to have tools, knowledge or advice available to enable them to make status determinations with reasonable care, together with procedures for dealing with challenges.

Share this article