The Treasury has announced that it will end the departmental assurance processes for the use of off-payroll employment practices as the introduction of the IR35 tax rules means that department-specific are no longer needed.
In a written statement yesterday, chief secretary to the Treasury Liz Truss said that the rules introduced in 2012 requiring departments’ most senior staff to be on payroll, and to seek assurance in relation to the tax arrangements of their long-term, high-paid contractors, were no longer needed.
The regulations required departments to ensure that their most senior staff were on the payroll, unless there are exceptional temporary circumstances. Off-payroll staff are those who are paid through an intermediary, often their own personal service company, but who would count as an employee if they were providing their services directly. Compliance was monitored through an annual Treasury review.
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But reforms to IR35 off-payroll employment regulations introduced in April 2017 had superseded the Treasury controls, Truss said. The IR35 rules require all public bodies to deduct tax and contractors' national insurance contributions if they work like an employee, with compliance monitored by HMRC.
“Following a review of the rules, I have concluded that the off-payroll rules implemented in 2012 are now superseded by the IR35 reforms, and the requirement for departments to include set contractual provisions and conduct an assurance process are no longer necessary.”
The updated guidance, published yesterday, said the Treasury “therefore no longer requires the right to assurance to be built into contractual provisions” and would no longer conduct an annual review into compliance.
The guidance said board members and/or senior officials with significant financial responsibility must be on payroll, unless there are exceptional circumstances, in which case any arrangements must be approved by an accounting officer, and the exception cannot last more than six months.
Lower-level officials without significant financial responsibility can work under the IR35 rules if assessments are conducted in line with HMRC guidance.
However, it added that departments will need to ensure they have the necessary arrangements in place to allow them to comply with the IR35 rules. “[It] is essential that public sector employers are able to assure themselves that their staff are meeting their tax obligations and the government remains committed to tackling all forms of tax avoidance,” it added.