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5th July 2017

Dealing with the challenge of IR35

IR35 is also known as ‘intermediaries legislation’. It’s a set of rules that affect tax and National Insurance contributions for workers employed through an intermediary. In 2016 Government announced that in the public sector IR35 status would be determined by the client rather than the contractor. This means that public sector bodies are now responsible for:

  • Determining whether the rules apply
  • Calculating, reporting and paying relevant taxes if they apply
  • Payment of any financial penalties in the event of non-compliance

Two of NEPO’s solutions are directly affected by IR35:

NEPO adopted a proactive and collaborative approach to managing this legislative change:

  • For NEPRO it was determined that from April 2017 no workers would be appointed on an interim/PAYE basis. This was relatively straightforward and in line with the practices that NEPO instilled into the solution when it was first introduced in 2012 – namely to focus on outcomes, rather than the individual.
  • For Agency Staff, NEPO has instructed its neutral vendor de Poel that all existing and future appointments must be made via PAYE. Exceptions to this blanket approach can be made but must be communicated to de Poel.

This approach ensures compliance whilst also allowing an element of flexibility. There is also an element of cost-avoidance due to the reduced amount of resource required to assess the employment status of each individual worker (some estimates being as high as 45 minutes per worker). Furthermore, this streamlined approach provides clarity to the market as well as to colleagues working across NEPO Member Authorities.