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Will you be able to apply the new legislation to off-payroll workers in the public sector?

3 March 17 | By: Jas Jhooty


If you are a Public Sector Body, HMRC have introduced onerous new legislation forcing you to ascertain the employment status of your off-payroll workers who are deemed to be Personal Service Companies.

If it transpires that the worker is deemed to be an employee (if it was not for the fact that they were hiding behind a veil of incorporation) HMRC are forcing Public Sector Bodies to deduct payroll taxes and National Insurance Contributions from invoices presented to them by these workers from 6th April 2017.

Agency Workers

Many Public Sector Bodies use agencies to supply workers to them. The new rules place the responsibility on the ultimate fee payer (i.e. The Public Sector Body) to decide whether the new rules are to apply.

HMRC’s New Employment Status Service

To aid Public Sector Bodies, HMRC are still working on a new online tool to provide an employment status ruling. This has been promised to be released some time in March. This is not ideal as it gives hardly any time for Public Sector Bodies to perform the necessary ground work before the new rules are to apply from 6th April 2017.

HMRC have reiterated that there is no change to the existing underlying case law that has been built up over the years to determine an individual’s employment status. As there is no one question that provides a definite answer to determine employment status, it is highly dubious that we can believe HMRC’s claims that their new Employment Status Indicator will be reliable.
With the Government’s intentions to raise an additional half a billion pounds per year as a result these new measures, it is highly likely that the results will be biased towards returning an employed status more often than not.


It is anticipated that 25% of your off payroll workers will be legitimately deemed to be non-employees, with another 25% clearly being deemed to be employees and thus requiring payroll taxes to be deducted from invoices presented to you for their services.

That will still leave 50% of your off payroll workforce that will require you to make a decision on their employment status. We anticipate that HMRC’s new tool will deem these workers to be employees.

Due Diligence Process

To help Public Sector Bodies, our experienced employment tax consultants have devised a tried and tested employment status due diligence process that if followed, will provide a more accurate picture of the true relationship between you and the off-payroll worker. As this is a reliable and defined process it can be used to justify your position to HMRC, and most importantly will save you from having to pay unnecessary payroll taxes, thus saving you money.

We have launched a dedicated online service where we can offer accurate IR35 reviews free of charge. Click here to find out more information.

How emTax can help

For more information about our employment status due diligence process including details of how it operates and how much it costs, please do not hesitate to contact us on 0345 548 3680 or by email.


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