New tax policies were brought in on 6 April 2017 that could impact those who deliver personal services through a personal services company (PSC) to any firm that is categorised as a ‘public authority’. In addition, there have been changes to how a ‘public authority’ is defined.
Key changes to the rules are as follows:
- The public authority or agency providing payment to the PSC determines a ‘deemed payment’ on the basis of the fees charged by the PSC for the individual’s work.
- The entity providing payment to the PSC for the individual’s work must, in the first place, subtract employee National Insurance contributions (NICs) and PAYE as though the deemed payment is an employee’s wage payment.
- As well as paying the NICs and PAYE subtracted from the deemed payment to HMRC, the paying entity also has to pay employer NICs on the amount of the payment.
- No additional NICs and PAYE needs to be paid on the net amount that the PSC receives, meaning the entire amount can be passed to the individual in question.
These new rules are designed to include individuals who are contracted by companies that are controlled or owned by the public sector, as well as the NHS, local authorities, universities, parish councils and, of course, public sector organisations (which includes government divisions and their executive agencies).
Before these new rules took effect, private sector retailers (such as opticians and pharmacies) would have been included in the off-payroll working in the public sector provisions. This would have meant such businesses having to ascertain whether the amendments affected all contractors engaged by them via intermediary PSCs. As this was an unintended consequence, the measures were modified appropriately.
Payments paid on or after 6 April 2017 are covered by the new rules, meaning any contracts signed before 6 April 2017 where payment for services is to be paid after 6 April 2017 are affected.
To find out more or to get help managing these rule changes, please contact us.
BWB Accountants Surrey
First Floor, 5 Park Court, Pyrford Road, West Byfleet, Surrey KT14 6SD
tel 01932 350117