IR35 Off Payroll Working
The IR35 regulations, often referred to as “off-payroll working”, is tax legislation. The regulations aim to ensure that individuals undertaking the same roles in an organisation pay the same amount in taxes, irrespective of how they are engaged. This will apply to workers (typically contractors or freelancers) who supply their services via an intermediary (a link between the University and the individual providing the services in practice), the most common example being a personal services company (PSC) or an agency.
The IR35 regulations have been in place since April 2017 for the public sector (including Universities). In April 2021, these regulations will be extended (and implemented for private sector organisations) introducing new requirements for the University to follow when engaging individuals who provide their services through an intermediary (i.e. personal services company (PSC) or limited company or an agency).
The regulations require the University to determine the appropriate employment status/contractual relationship between the individual and the University. Where an individual is engaged through an intermediary, the University is required to complete an employment status determination to confirm its relationship with the individual providing the services and whether the regulations apply.
From April 2021, the University is required to communicate the outcome of the employment status determination to the individual (who will in turn cascade this down the supply chain, if appropriate) and to the intermediary, to confirm who is responsible for deducting income tax and National Insurance Contributions (NICs) from payments to the individual.
The University will also need to provide a disagreement process for individual(s) to challenge the outcome of our status determination.
Internal procedures from 2021
In order to ensure that our practice meets the requirements of the extended regulations, the University has established a dedicated Finance/HR team to support departments with compliance under the new procedures.
Where a department is seeking to engage a worker through the vendor system (this therefore excludes roles already identified as employees or casual workers), and before any offer of work can be made, the following process must be followed:
- The department’s Engaging Manager will complete an Off Payroll Working Questionnaire. This provides information to enable the central team to undertake a status determination;
- The central team will use the questionnaire to complete a status determination assessment. This will confirm if the engagement is an employment type relationship or one of self-employment for an individual and if the Off Payroll Working / IR35 regulations apply to the engagement, where the worker is engaged through an intermediary, and the appropriate engagement and payment method where PAYE and NICs must be deducted.
- The central team will inform the Engagement Manager of the status determination outcome and agree how to proceed with the engagement.
- Once agreed, the central team will write to the worker and other party (if any) with whom it has contracted for the supply of service, to confirm the University’s status determination and the reasons for it.
- The letter will also tell the worker how to challenge the University’s status determination, if necessary, via the University’s status disagreement process, which will be managed by the central team.
- The central team will retain all information used to inform the status determination for the worker, irrespective of the outcome, and ensure this is referenced, recorded and stored appropriately.
- Departments will be responsible for ensuring that no engagement is made before the appropriate status determination has been made by the central team.
- This will include re-engagements or extensions of existing engagements, to ensure that the worker’s recorded employment relationship is still appropriate.