Off Payroll Working (or IR35) is UK tax legislation that defines the rules for operating PAYE tax and national insurance for a worker who provides a service to a client through an “intermediary”. In most cases this ‘intermediary’ is the worker’s own personal service company or limited company. If this worker is performing a service for your school that would normally be performed by one of your employees, IR35 applies.
The implications for your school
The off-payroll working rules are designed to make sure that where an individual would have been an employee (they are doing a job an employee would normally do), they broadly pay the same tax and NI contributions (NICs) as an employee.
Prior to April 2017, it was the responsibility of the worker to assess whether ‘deemed employment’ applied to the work they undertook for a school. From 6 April 2017, in the Public Sector, it is now the responsibility of the engager (the school) to decide whether the worker should be ‘employed’.
If the off-payroll working rules apply:
The school / academy is responsible for calculating, deducting, and paying over the PAYE Tax and National Insurance.
Employer’s national insurance will also be due on the payments, which is 13.8% for all gross NI-able pay over £702 per month.
This is a cost that the school/academy have not have budgeted for.
If deemed employment does apply, how you calculate the amount of their invoice that is subject to tax and NI is also quite complex.
Talk to our Tax Specialist
Our Tax Expert Paul Chappell, has worked with many organisations on this issue and can support your school or academy through the process of identifying off-payroll workers and then the processes needed to report IR25 to HMRC and process through your payroll.
