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Guidance for managers on IR35 (Off Payroll Working)

The above guidance on IR35 (Off Payroll Working) is for managers with the authority to engage external contractors.

The purpose of the guidance is to ensure that managers are aware of the IR35 tax rules in respect of the engagement of two specific types of contractor; those with a personal service company and those in a partnership; and that they adhere to these rules.

The Off-Payroll Working (IR35) rules apply where (1) a contractor carries out work for the Council through their own intermediary, (i.e. a personal service company or partnership) and (2) they would be classed as an employee if providing their services to the Council directly.

The Off-Payroll Working (IR35) legislation took effect on 6 April 2017 and applies to public sector bodies. There was an update to the legislation on 6 April 2021, which has been taken account of in the Council’s guidance document. The purpose of the legislation is to ensure  that people who do the same job in the same manner, pay similar amounts of income tax and national insurance, whether they are employed directly by the Council or whether they work through an intermediary (i.e. a personal service company or a partnership). It should be noted that the legislation is to be applied on an engagement by engagement basis.

The hiring manager needs to establish at the outset the business model of the contractor they are planning to engage i.e. is it a personal service company or a partnership and hence potentially within scope of the IR35 tax rules. Further advice on this can be obtained from Legal Services, where required.

It should be noted that significant financial penalties can be imposed by the HMRC on public-sector bodies who fail to adhere to the IR35 rules.

Council managers involved in engaging contractors who have their own personal service company or are in a partnership require to follow the procedure contained in the guidance to ensure that the IR35 tax rules are adhered to, including undertaking the HMRC ‘CEST’ assessment detailed therein.

If a manager has any questions on the guidance, then they can contact the HR Service Centre at AskHR@aberdeencity.gov.uk or on 01224-523939.

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