Guidance

Public sector off-payroll working for clients

Find out how off-payroll rules (IR35) work in the public sector.

Overview

If you’re a public authority and contract workers to provide services for you through their intermediary, you’ll need to decide if the off-payroll working rules apply.

The off-payroll working rules make sure your workers pay broadly the same tax and National Insurance contributions as an employee if they:

  • provide services to you through their own intermediary - most commonly a limited company that they control
  • would have been an employee if they were providing their services directly to you, the client

The intermediary will normally be the worker’s own personal service company, but could also be a partnership, a managed service company or an individual.

What is a public authority

You can find the full definition of a public authority for the purposes of the off-payroll rules in the Freedom of Information Act 2000 and the Freedom of Information (Scotland) Act 2002.

The off-payroll working rules apply for public authorities such as:

  • government departments, including their executive agencies
  • companies owned or controlled by the public sector
  • schools or universities
  • local authorities
  • parts of the National Health Service

The rules also apply to the:

  • UK Parliament
  • National Assembly for Wales Commission
  • Northern Ireland Assembly Commission

There are some differences in the off-payroll working rules definition of medical services providers to the definition in the Freedom of Information Act.

Hospitals, GP surgeries and dental practices will also need to check if the rules apply to their contracted workers. This includes contractors who are providing ophthalmic and pharmaceutical services for the National Health Service.

Off-payroll working rules generally do not apply if you are a retail business providing ophthalmic and pharmaceutical services for the National Health Service. This includes if you are a high street pharmacy or opticians.    

Your responsibilities as a public authority

Determine the worker’s employment status

You need to determine the employment status of a worker to see if the off-payroll working rules apply.

You can check if the off-payroll working rules apply using the Check Employment Status for Tax service.

Tell the person or organisation you contract with of your determination and if the rules apply. Do this on or before the contract is entered into, or when the work starts if that is later.

If you do not tell them of your determination, you’ll become responsible for paying the tax and National Insurance contributions due.

If the working practices of the engagement change or you negotiate a new contract with the worker, you must make sure that you re-check the rules to see if they still apply.

An engagement is the specific contract or piece of work that a worker is undertaking. For each engagement, whether the off-payroll working rules apply is determined by the:

  • terms and conditions
  • working practices

If the person or organisation you contract with asks for the reasons behind your determination, or disputes your determination, you must respond within 31 days. If you’re not the fee-payer and you do not respond, you’ll become responsible for paying the tax and National Insurance contributions due.

Tax and National Insurance payments

If off-payroll working rules apply, the fee-payer is responsible for deducting tax and National Insurance from payments you make to the intermediary. Read more about checking if you’re the fee-payer and your responsibilities if you are.

If you’re using an agency or other labour provider, the responsibility for deducting tax and National Insurance contributions will be the fee-payer. The fee-payer is the one who pays the worker’s intermediary. You should pay their invoice for providing the worker according to the contract with them.

Different rules apply if the person paying the intermediary does not meet certain conditions.

Contracted out services

The rules do not apply if you fully contract out services to a third party, like an outsourcing company.

An organisation receiving contracted out services will not have to apply the off-payroll working rules. This will remain the responsibility of the organisation receiving a worker’s services - for example, the client.

You should take care to make sure that a contract has not wrongly been relabelled to get around the off payroll working rules. Read more guidance and examples about contracted out services.

April 2021 changes to how the rules are applied

On 6 April 2021 how the off-payroll working rules are applied will change. You will need to find out what the changes are and start making preparations for them now.

The changes to the off-payroll rules were due to come into effect on 6 April 2020. This has now been delayed until April 2021 because of the spread of the coronavirus (COVID-19) pandemic. The delay is to help businesses and individuals deal with the economic impact of COVID-19.

The delay to the introduction of the changes is not a cancellation.

Published 3 February 2017
Last updated 20 March 2020 + show all updates
  1. This page has been updated to reflect the delay to the changes to the off-payroll working rules until 6 April 2021.

  2. The guidance has been updated to reflect the changes to how the off-payroll working rules will be applied from 6 April 2020.

  3. Contracted out service draft examples have been added.

  4. Updated to explain what a public authority is and what they need to do to follow the off-payroll working rules.

  5. This guide was updated to clarify how off-payroll working in the public sector rules apply to businesses that provide ophthalmic and pharmaceutical services.

  6. Page updated to include further information for public authorities.

  7. First published.