Q: When working for a public sector client, is it the client’s decision to assess whether I am outside IR35 or not?
Suppose the client tells me that I am outside IR35, but later HMRC investigate and decide to find me inside.
Who is now liable for the missing tax and any penalties? The client for making the wrong assessment, or myself for honouring their assessment?
A: The responsibility for deciding if the ‘off-payroll’ rules apply lies with the public sector organisation and, if applicable, the agency is responsible for operating PAYE. If HMRC successfully challenge the end client’s assessment of your employment status, then it is they who should ultimately be held liable for PAYE and NIC debt. Whilst the agency, as the fee payer, will be initially charged for PAYE and NIC arrears by HMRC, they only follow instructions from the end client and will no doubt require indemnifying by the public sector organisation.