Off payroll working in the public sector

payrollpro Registered, FMAAT Posts: 427 Dedicated contributor 🌟 🐵 🌟
Like many we are trying to deal with this new madness on the part of HMRC. According to the latest missive from HMRC a contractor in a PSC who has had their invoice interfered with and had PAYE deducted from the fees may immediately withdraw the net balance directly from the business as though it had gone through their own payroll. In other words the funds can pass directly from the payer to the directors current account.

Isn't this an offence under the companies act? I have looked at the process and cannot see any comment about the net payment belonging to the director, the fee belongs to the business and in order to make it the directors personal money it has to be processed in an appropriate manner - or am I missing something here?

I'm aware of the new restriction to T&S relief, so we add it back for the PCTCT figure, and the fact if they decide to process under IR35 that they are denied the 5% administration relief, but the idea that they can ignore business protocol sounds decidely fishy to me.


  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    I believe the piece you are missing is that the net fee (after deductions) would go through payroll as "non-taxable payment":

    Maybe I should start calling myself payrollpro too!
  • payrollpro
    payrollpro Registered, FMAAT Posts: 427 Dedicated contributor 🌟 🐵 🌟
    Thank you, that's a new one on me, shame the helpline didnt point me in that direction. Even Michael Steed in the tax updates is advising members to classify the payments as "cost of sales" as HMRC is also saying, as I mentrion above, that the net payment can actually "bypass" the normal company to director conversion route. Am I the only one noticing that the guidance is being created "on the hoof"? For me the biggest issue is the one expressed at the tax update, that its not the billing or payroll which is the issue, but the accounting for it.

    Actually it has become incidental for us because it seems all our clients who contract in the public sector have received letters telling they are not affected by the new rules and one has even received a certificate from an NHS Trust that the work lies outside IR35 as well! Not sure how they come to that conclusion but we are simply going to go along with it and see if HMRC finds the engager liable under such circumstances. I'm not holding my breath.
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