Two of HMRC’s IR35 guidance notes, ‘Off-payroll working through an intermediary’ and ‘Off-payroll working rules for public authorities’ have recently been updated. The former now includes some brief information about IR35 in the public sector and the latter has been amended to explain what a public authority is and what they need to do to follow the off-payroll rules.
A public authority is defined by the Freedom of Information Act 2000 and Freedom of Information (Scotland) Act 2002 and includes:
The rules also apply where PSCs are providing their services to UK Parliament, the National Assembly for Wales Commission and the Northern Ireland Assembly Commission.
The legislation however defines some public authorities that provide medical services differently to the Freedom of Information Act.
Where hospitals, GP surgeries and dental practices that provide NHS medical and dental services, then they will need to consider whether the off-payroll rules apply to all contractors working for them, including freelancers who are providing ophthalmic and pharmaceutical services to the NHS.
Retail businesses that provide ophthalmic and pharmaceutical services for the NHS, like high street pharmacies or opticians, will not need to consider the off-payroll rules.
A timely reminder that contractors should not rest on their laurels simply because an initial ruling by the public sector body that they are working for decides that they are outside of IR35. If the working arrangements remain unaltered throughout the contract, then fine, but should they change then the public authority has to reconsider their decision.
Whilst there is no compulsion on public sector bodies to use HMRC’s Employment Status Service (ESS) tool, the Revenue will stand by a result generated by it, provided the correct information has been inputted. There are rumours that some public authorities are using the tool to obtain an ‘outside IR35’ result and then redesigning the working arrangements for a contract that was previously caught by IR35. Should this be true, then such authorities will need to exercise extreme care, as HMRC will not stand by results through contrived arrangements. If therefore the working practices are simply illusory, then this would be treated as evidence of deliberate non-compliance for which a penalty would be imposed.
The guidance notes can be accessed below.