Off-Payroll Working Regulations

The changes from 6 April 2021 have brought new demands on Public Sector organisations, including those who provide services in the healthcare sector, meaning all organisations should have taken action to prepare and comply with the changes.

What are the Off-Payroll Working Regulations?

Broadly, the legislation introduced in April 2017 for Public Sector bodies requires those organisations to have controls in place to identify, assess and determine the employment status for income tax/NIC purposes of contractors engaged via an intermediary (i.e. typically a Personal Service Company (“PSC”) or Partnership).  This was in addition to the controls and assessment already required for off-payroll engagements with individuals directly.

For engagements that are determined to be more akin to an employment relationship, the organisation (which is responsible for the determination and assessment, or the fee-payer if another entity ultimately pays the PSC rather than the end client) is required to apply income tax and NICs withholding through the payroll to payments made in relation the engagement.

If HMRC successfully challenges that the engagement should have been deemed employment and payments processed through payroll for tax and NIC purposes, they will now seek this payment from the end client/payer of the PSC rather than the PSC themselves (which they would have done prior to 2017 for those PSCs operating in the Public Sector).

The key changes for the healthcare sector from April 2021 were:

1. A requirement to provide the PSC with a Status Determination Statement, documenting the assessment and result of the employment status assessment, confirming whether it is on or off-payroll for tax and NIC purposes; and
2. Have a documented Disagreement Process in place

Who does it affect?

• A worker who provides their services through their intermediary
• A GP practice that receives services from a worker through their intermediary
• An “agency” providing workers’ services through their intermediary

For completeness and as previously highlighted, it does not impact off-payroll engagements that are direct with individuals. If HMRC successfully challenge these engagements, the income tax and NIC liability has always sat with the fee payer-provider organisation.

What is key to consider?

From feedback, many organisations have not been clear in how to establish controls in managing this risk area given the complexities and variety of stakeholders involved. We have therefore been helping organisations get to grips with the practicalities and ensuring they can:

• Identify which engagements may need to be considered further;
• Once identified, practically carry out a robust employment status determination; and
• Implement an appeals process where challenges to an employment status determination are made.

Alongside this, we have undertaken training workshops and assisted with establishing clear governance processes to help demonstrate reasonable care is being taken and reduce the risk of HMRC challenging the approach.

It is vitally important to have an approach that is robust and shows reasonable care. The DWP has recently received a liability of c. £87m for not being able to demonstrate appropriate controls, despite using HMRC’s own Check Employment Status Tool (CEST). This highlights the need to take care and ensure processes and governance are continually monitored and enhanced throughout the organisation to mitigate the risk of HMRC challenging successfully in the future.

Our support can help with this by embedding clear governance, process and robust documentation. This is achieved by utilising our experience, as well as our status assessment technology to help confirm and produce detailed Status Determination Statements, creating a transparent, consistent and effective approach for all parties.

Get in touch

If you’d like further information on the Off Payroll Working (“OPW”) legislation and how it may affect you or your practice, please don’t hesitate to get in touch via the form below.

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