The intermediaries legislation was introduced in 2000 and requires individuals working through an intermediary to pay broadly the same tax and NIC as employees, where they would have been an employee if they had provided their services directly. Public sector bodies also have a responsibility to ensure that people working for them are paying the right tax.
From April 2017, individuals working through their own company in the public sector will no longer be responsible for deciding whether the intermediaries legislation applies. This responsibility will instead lie with the public sector employer, agency or third party that pays the worker’s intermediary. The closest party to the worker’s limited company in the supply chain will be required to comply with the rules.
Where the public sector organisation engages directly with the intermediary, the public sector organisation will be responsible for operating the new rules and collecting and paying the tax and NIC. Where the engagement is via a third person (agency) that third person is responsible for operating the new rules.
HMRC will provide help for employers and a digital tool to provide a real-time view on whether the rules need to be applied.
This is part of the government’s broad reform of the way intermediaries are taxed. The measure is aimed at improving the effectiveness of the intermediaries legislation in relation to the public sector by moving the responsibility away from the intermediary.