Guidance

Off-payroll working rules (IR35) for public authorities

Find out how off-payroll rules work in the public sector and which public authorities are affected.

Overview

If you’re a public authority and plan to offer a temporary job to someone who works through their own intermediary (often their own company, but this could also be a partnership or another person), you’ll need to decide whether the off-payroll working rules apply.

The off-payroll working rules are in place to make sure that, where an individual would have been an employee if they were providing their services directly, they pay broadly the same tax and National Insurance contributions (NICs) as an employee.

If you’re a public authority, you need to decide whether the off-payroll working rules apply because the appropriate conditions have been met.

You’ll also need to deduct tax and NICs if you pay the worker’s intermediary directly. If the worker is paid by an agency or other labour provider, you’ll need to tell the body that pays the worker that, in your view the off-payroll working rules should apply.

What is a public authority

A public authority is defined by the Freedom of Information Act 2000 and the Freedom of Information (Scotland) Act 2002 for the purposes of the off-payroll rules.

This definition includes:

  • government departments and their executive agencies
  • many companies owned or controlled by the public sector
  • schools and universities
  • local authorities
  • the National Health Service (NHS)

These rules also apply to people providing services through their own intermediary to the UK Parliament, the National Assembly for Wales Commission, and the Northern Ireland Assembly Commission.

The off-payroll legislation defines some public authorities that provide medical services differently to the Freedom of Information Act.

Hospitals, GP surgeries and dental practices

Hospitals, GP surgeries and dental practices that provide NHS medical and dental services will need to consider whether the off-payroll working in the public sector rules apply to all contractors working for them through an intermediary. This includes contractors who are providing ophthalmic and pharmaceutical services to the NHS.

Businesses that provide ophthalmic and pharmaceutical services

Retail businesses providing ophthalmic and pharmaceutical services for the NHS, like high street pharmacies or opticians, won’t need to check if the off-payroll working rules apply.

Responsibilities of public authorities

As a public authority, you’ll need to decide if the off payroll working rules apply and tell the worker, or the agency or other labour provider who supplies the worker, if they apply. You’ll need to do this before the contract or the work starts (whichever is later).

If the contract was entered into before 6 April 2017, you’ll need to inform the relevant person of your decision before the next invoice payment is made.

You’ll need to reconsider your decision if the working practices of the engagement change.

You can check if the off-payroll working rules apply using the Check employment status for tax service.

Where the off-payroll working rules apply and you pay the intermediary directly, you’ll need to deduct tax and National Insurance from payments you make to the intermediary.

If you’re using an agency or other labour provider, they’ll be responsible for deducting tax and National Insurance from payments to the worker’s intermediary.

Slightly different rules apply if the person paying the intermediary is outside of the UK.

If the person you have a contract with asks for the reasons behind your decision in writing, you must respond within 31 days. If you don’t, you’ll become responsible for paying the tax and NICs due.

Contracted out services

The rules don’t apply where a public authority has fully contracted out services to a third party (like an outsourcing company) and the workers don’t personally provide their services to the public authority.

Managed Service Company

A Managed Service Company (MSC) is a form of intermediary company through which workers provide their services to end clients. The worker doesn’t exercise control over the company.

If the worker is providing their services to a public authority through an MSC, the off-payroll working in the public sector rules will apply.

Payments for off-payroll workers

If you’re paying the worker’s intermediary directly, you should read the guidance for off-payroll fee payers.

If you use an agency or other labour provider, you should inform them that you’ve decided that the rules apply. You should pay their invoice for providing the worker according to the contract with them.

Published 3 February 2017
Last updated 7 July 2017 + show all updates
  1. Updated to explain what a public authority is and what they need to do to follow the off-payroll working rules.
  2. This guide was updated to clarify how off-payroll working in the public sector rules apply to businesses that provide ophthalmic and pharmaceutical services.
  3. Page updated to include further information for public authorities.
  4. First published.