From April 2017 the responsibility for deciding if the legislation should be applied shifts from the worker’s intermediary to the public authority the worker is supplying their services to.

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

The worker’s intermediary is able to set against its own income tax and NICs liability in the tax year, an amount equivalent to the income tax and NICs deducted from payments to it from the fee-payer.

The definition of a public authority covers government departments and their executive agencies, many companies owned or controlled by the public sector, universities, local authorities, parish councils and the NHS.

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.

Under the new rules, a worker working through personal service company (PSC) or other intermediary has the responsibility of providing the fee-payer with the information they need to help determine whether the off-payroll rules should apply and, where they do, then providing the information needed to allow the fee-payer to deduct tax and NICs from the payment they make to the intermediary. They also have responsibility for reporting to HMRC on own, and company’s tax affairs.

An agency, third party or public authority where they are acting as fee-payer is responsible for operating employment taxes associated with the contract; paying the deemed direct payment to the PSC; reporting to HMRC through RTI the employment taxes deducted; and paying relevant employers’ NICs.

Public authorities have responsibility for determining whether off-payroll working rules should apply initially and when there are contractual changes, as the party engaging the worker for a specific task or role.

In cases where public authorities are using an agency or other third party to provide labour, they are responsible for notifying them whether off-payroll working rules should apply to the contract they have with the worker.

HMRC says public authorities, agencies and third parties supplying contractors should begin to review existing contracts in order to prepare for the change.

There is to be a new digital service, called the employment status service, offering an online tool which will allow workers and fee payers to obtain the HMRC view of whether any current and prospective workers would fall within the off-payroll rules from 6 April 2017.

The user answers a number of questions around the relationship between the worker and the public sector client they are contracted with. It is for the public authority to decide whether off-payroll working rules should apply.

The service is optional and is expected to be made available by the end of February 2017, and will replace the existing employment status indicator tool.  Guidance on Off-payroll working in the public sector: reform of intermediaries legislation is here: https://www.gov.uk/guidance/off-payroll-working-in-the-public-sector-ref...

Specific guidance for public authorities is here.

Guidance for individuals paid through PSCs is here.

Guidance for fee payers is here.