Off Payroll Working

The off payroll working rules were introduced to try and prevent the avoidance of tax and national insurance contributions where services are provided through the use of intermediaries, such as personal service companies (PSC) rather than through direct employment of an individual.  The rules require that where the characteristics of the service provided are those of employment, the amount paid to the PSC should be treated as employment income and should be subject to PAYE and National Insurance.  There were concerns that the rules were not being implemented properly.  From April 2017 the off payroll rules were introduced to the public sector and companies funded principally by government funds.  As a result they may already be familiar to some charities.  From April 2020, these rules are being extended to the private sector.  They will not apply to small companies being those that satisfy two or more of the following conditions:-

  • Annual Turnover of not more than £10.2 million
  • Balance sheet total of not more than £5.1 million
  • Number of employees of not more than 50.

Where a charity does not satisfy these conditions, the new rules will require the charity rather than the worker to determine their employment status and where appropriate deduct PAYE and NIC when making payments.  For any individuals providing services through a personal service company, e,g consultants, the charity should complete the HMRC employment checklist to establish if the service provided has more characteristics of employment.  This includes consideration of who determines when the individual works, whether a substitute can be provided and who guides and controls the work completed. 

For more information on this subject please contact Nicola Mason or call 01772 821021