In his Autumn Statement 2016 the chancellor confirmed that the treatment of Personal Service Companies (PSCs) working in the public sector will change from April 2017.

Changes to the off-payroll working rules for the public sector were originally proposed in a HMRC consultation in May 2016.  The government has now confirmed that, from April 2017, where a Personal Service Company PSC provides services to the public sector:

  • The responsibility for paying the correct employment taxes will move from the PSC to the public sector body paying it.
  • The paying body will have to assess the employment status of the individual and deduct income tax and NICs accordingly.
  • The 5% flat rate deduction that applies to PSCs who are subject to IR35 will be removed.

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HMRC's earlier consultation document: Off-payroll working in the public sector: reform of the intermediaries legislation