The much publicised "Off Payroll Working" rules came into effect for medium and large companies in the private sector on 6 April 2021.

What are the Off Payroll Working Rules?

Until 6 April 2021, where an individual provided services not as an employee or worker but as a self-employed consultant to a client through their intermediary (usually a personal service company), responsibility for determining whether tax and NI was payable and for making the relevant deductions fell to the intermediary.

From 6 April 2021, the Off Payroll Working rules place responsibility on the client to determine whether the individual has "Deemed Employment Status" for tax purposes (provided the client is a medium or large company). To make this determination the client is legally required to carry out a Status Determination Assessment before it engages the intermediary.

In the event of the individual having Deemed Employment Status, responsibility to account for PAYE will fall on the relevant Fee Payer. This is the organisation which sits directly above the worker’s limited company in the labour supply chain.

What next?

By 6 April 2021 medium and large businesses that engage individuals to deliver services to them through an intermediary should ensure they have completed the following steps:

  • have a process for distinguishing between engagements with relevant intermediaries that fall to be assessed under the Off Payroll Working Rules and other genuine outsourcing/contracting arrangements that do not come within the scope of the rules
  • carried out a Status Determination Assessment for every individual delivering services to it through a relevant intermediary and provided a copy of the result to the intermediary/agency/individual
  • determined who is the responsible Fee Payer
  • ensured their payroll processes are set up to deal with any PAYE deductions where they are the deemed Fee Payer (for example some business will process this through a separate payroll to employees and workers who are "on the payroll")
  • reviewed their agency agreements in light of any Off Payroll Working implications that will arise.