Treasury confirms the death of public sector IR35 assurance process

The Treasury has confirmed what many pubic sector contractors have long-suspected -- that the assurance process of 2012 is dead, due to the birth of IR35 reforms in April 2017.

In an ‘off-payroll engagements’ update, officials said that the requirements for public bodies to include contractual provisions and run the assurance process are “no longer necessary.”

For contractors, the removal of the requirements means that, officially, they no longer need to provide evidence of a contract review to assure their engager that they are outside IR35.

For engagers, notably central government departments and their arm’s length bodies, it means they will no longer be monitored for compliance through an annual review process, the results of which used to be presented to parliament.

'Assess each engagement'

Instead, both worker and end-user now have their compliance obligations spelt out under the IR35 rules introduced on April 6th 2017, making the ‘PPNs’ of 2012 and 2015 redundant.

New HMT guidance for engagers outlining the update confirms: “Departments must [now] assess each engagement by considering what the relationship between the client and the worker would be if an intermediary were not involved.

“[This should be done] using information about all working practices of the engagement and not job titles or contracts alone.

“HMRC has developed a digital tool to help public sector bodies check the employment status of a specific engagement.”

'Decision-making responsibility'

But crucially for senior contractors, officials with “decision-making responsibility for the management and spending of public money” are unaffected, meaning they will stay on the engager’s payroll.

“It remains essential that board-level appointments and/or those with significant financial responsibility should be on the payroll of the department or other employing body, unless there are genuine exceptional circumstances that do not exceed six months,” the Treasury update says.

Speaking in her final days in her role as the Treasury’s chief secretary, Lizz Truss said such senior appointees’ duration of engagement would now be reported in the annual accounts of the engaging department.

'Superseded'

“Following a review of the rules, I have concluded that the off-payroll rules implemented in 2012 are now superseded by the IR35 reforms,” she added, without pointing out how discredited the 2012 rules became (-- HMRC’s Business Entity Tests, which were central to the process, were criticised from the outset but not axed until some two-and-half years later).

Ms Truss added: “Reforms to IR35 off-payroll working rules in April 2017 require public bodies to deduct tax and NICs if the off-payroll worker works like an employee, compliance of which is monitored by HMRC.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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