The intermediaries legislation was introduced in the UK to ensure that people doing the same work for the same pay were liable to the same tax and national insurance contributions whether employed directly or working through an intermediary such as their own personal services company. The UK government considers however that there is widespread non-compliance with the intermediaries legislation and is therefore proposing some amendments.

From April 2017 public sector bodies and agencies will become responsible for operating the tax rules that apply to off-payroll working in the public sector. The rules as they apply to the private sector will continue as before.

This consultation is about reforming the intermediaries legislation to improve its effectiveness in the public sector. The proposals therefore apply to people working in the public sector through their own personal service companies. From April 2017 the public sector body will be required to apply the intermediaries tax rules and pay the relevant income tax and national insurance contributions.

The consultation seeks views on the impact of this change and the details of the policy, including the new process to help determine whether an intermediary is within the scope of the rules.

The consultation is inviting opinions from interested parties on:

• the scope of the reform of the intermediaries legislation;
• how the reformed rules will work; and
• ways to minimize burdens on engagers who are affected.

The public sector organization engaging the services will first need to decide if the rules apply and then calculate, report and pay the relevant taxes. The government is introducing a new gateway process to allow anyone taking on a worker through a personal services company to determine if the intermediary tax rules need to be considered. The aim is to give the engager certainty about the application of the rules.

There will be a right of appeal against the tax or national insurance liability. If the engager and the personal service company disagree on the application of the rules a formal review of the decision may be requested and the decision can be appealed to a Tribunal.