IR35 - The Off-Payroll Worker Marker

Confusing guidance was issued on 06 and 08 April 2020 concerning the above, field 208 on the Full Payment Submission (FPS).  This Off-Payroll Worker (OPW) marker is new from tax year 2020/21 and should be used to indicate whether the individual is one falling under the IR35 rules, i.e. a deemed off-payroll employee rather than a ‘real employee’.

The purpose of a ticked marker for an individual, sent to HMRC, is that they should not issue any Student Loan or Postgraduate Loan notices and the employer should not operate any that exist.

We now have clarity.

On 17 March 2020, the UK Government announced that the planned roll-out of IR35 reforms to large and medium-sized organisations will be delayed for one year (until 06 April 2021).  This was detailed in a Gov.UK announcement ‘Reforms to off-payroll working rules have been delayed by 12 months as part of the government’s Covid-19 economic response package’.

However, the off-payroll rules already operating in the public sector would continue.

This bought into play 3 issues that were due to apply from 06 April 2020, all of which were new and were reforms (which the UK Government said it had delayed):

1. The production of the Status Determination Statement (SDS)
2. Putting in place a SDS appeals / disagreement process and
3. Marking off-payroll workers with the above OPW flag

If they were reforms, presumably they were not going ahead.

On 06 April 2020, Alison Walsh from HMRC posted on the tax agent’s blog what the delay meant for organisations and those who may have fallen under the reforms.  Remember that 06 April 2020 was the first day of the tax year.

In relation to the above three points, she said:

1. Organisations would not have to issue status determination statements, therefore, by implication
2. There was no need to have a SDS appeals / disagreement process in place and
3. ‘Organisations in the private and third sector should not use this indicator’ (i.e. the OPW flag)

And I quote:

For the tax year 2020-21, public authorities will not be required to: 

1.      Produce a status determination statement (SDS) and pass it to the worker and the first party in the contractual chain

2.      Have a status disagreement process in place

Regarding point 3 and the OPW marker, she said, and I quote:

However, from 11 May 2020 there will be an additional requirement on public authorities, or agencies, for contracts which fall inside the off-payroll working rules. The party paying the contractor's company will be required to start using the PAYE RTI 'off-payroll worker subject to the rules' indicator in payrolling software. While there is no requirement to start using the off-payroll worker indicator on RTI submissions from 6 April 2020, this function will be available and may be used from that date.

From this, I interpreted that statement to mean that:

• For payments made on or after 11 May 2020, off-payroll workers MUST be marked in payroll software, field 208
• For payments made on or after 06 April to 10 May 2020, off-payroll workers CAN be marked, however, there is no requirement to do so

On 08 April 2020, HMRC’s Software Developer Support Team (SDST) issued a communication to software developers saying:

Public sector organisations will continue to operate off-payroll working using the rules introduced in 2017. Public sector organisations should include the OPW indicator (data item 208) on the FPS submissions for any workers operating under off-payroll rules.   Private sector organisations will continue to engage individuals as they currently do and should therefore not be reporting off-payroll workers via RTI. Fee-payers may need to submit an FPS for an off-payroll worker working in the public sector, depending on the worker’s employment status determination and they should use the OPW indicator when doing so.

There is no mention of 11 May 2020 as being an effective date.  SDST also included an updated RTI data items grid for 2020/21 that has been posted to Gov.UK as version 1.2.  The only change as far as I can see is the description of the field 208.  This has changed:

• From ‘Off-Payroll Worker Subject to the 2020 Rules’ to
• ‘Off-Payroll Worker subject to the rules’

Subtlety, the removal of the words ‘2020’ have made this marker applicable to individuals that are already deemed employees. 

Perhaps clearer indication of whether it is 06 April 2020 or 11 May 2020 came in the April Employer Bulletin on 24 April 2020.  On page 6, hidden under ‘Public Authorities’ came the statement:

The planned changes to the rules were due to bring in additional responsibilities for public authorities. 

 For the tax year 2020-2021, public authorities will not be required to: 

• Produce a status determination statement (SDS) and pass it to the worker and the first party in the contractual chain, or
• Have a status disagreement in place

 These requirements will instead take effect from April 2021.

 However, from 11 May 2020 there will be an additional requirement on public authorities, or agencies, for contracts which fall inside the off-payroll working rules. The party paying the contractor’s company will be required to start using the PAYE RTI “off-payroll worker subject to the rules” indicator in payrolling software.  

While there is no requirement to start using the off-payroll worker indicator on RTI submissions from 6 April 2020, this function will be available and may be used from that date.

From a position of not having to make any changes, public sector employers now have to make a change.  This can be from 06 April 2020 but must be from 11 May 2020.

So, public sector employers will need to:

• Identify their off-payroll deemed employees
• Identify where in payroll software the marker is housed
• Set the OPW indicator to ‘Yes’
• Include on the next Full Payment Submission 

At a time when payroll departments are concentrating on getting the country paid, this is an obligation that we do not really want, especially coming with this late confirmation.