The Intermediary Legislation (known as IR35) applies if an individual engages with the end client through their own intermediary. The Trust (Public Sector Body) is responsible for determining whether IR35 rules apply to a particular engagement. If these rules apply the Trust is required to withhold tax and National Insurance from the payment "at source" and submit the reports to HMRC. These rules are in place to make sure that where an individual would have been an employee if they were providing their services directly, they pay broadly the same tax and national insurance contributions as an employee.
The intermediary can be:
- a worker's own limited company - known as a personal service company (PSC)
- a partnership
- an agency worker
If you intend to engage as a contractor, consultant, or specialist service provider with the Trust then please be aware that the HMRC's IR35 / CEST assessment will need to be carried out by the engaging School before any work is carried out. Please contact the Finance Team for further guidance.
If the contractor or consultant is deemed 'inside IR35' it is the Trust's responsibility to ensure that tax, national insurance contributions etc are being paid in line with the new legislation and so payment will be made net of these.
If the contractor is deemed 'outside of IR35' then tax and NIC payments rest with the contractor or consultant.
Characteristics that may result in being inside the legislation include the following:
- Having to work under direct supervision or control of the end client
- Having to work at a set location or to set hours
- Having to formally request leave or seek permission for absence
- Having an hourly, daily, or weekly rate of pay
- Being paid for overtime, or to correct unsatisfactory work
- Is unable to provide a substitute, i.e. the work has to be carried out by the contractor
- Is able to be moved from task to task or to another location without arranging a new contract
Characteristics that may result in being outside the legislation include the following:
- Not having to work under direct supervision or control of the end client
- Having control over how / where / when to complete the work
- Has no access to holiday pay or sickness benefits
- A fixed fee is agreed by the employer for the work, regardless of how long it takes to complete
- Financial risk, e.g., having to correct errors in their own time and at their own expense
- Being able to propose a substitute agent or person to complete the work
Follow this link to the Government guidance: Understanding off-payroll working (IR35)