IR35 off-payroll working rules

From 6 April 2021 off-payroll working rules and how they apply will change. All public authorities and medium and large sized firms will be responsible for deciding the employment status of workers/contractors.

What are the off-payroll working rules?

Off-payroll working rules, also referred to as IR35 (Inland Revenue 35), applies if a worker / contractor provides services via their own limited company or another type of intermediary which could be:

• a partnership
• a personal service company
• an individual

It means that those employed as a contractor pay the same tax and National Insurance contributions (NIC) as direct employees.

The client (public authorities and medium and large sized firms) who employees the worker/contractor is responsible for determining if the off-payroll working rules apply.

Who does this affect?

HMRC has outlined the IR35 changes as follows.

All public sector clients and private sector companies that meet 2 or more of the following conditions:

• an annual turnover of more than £10.2 million
• a balance sheet total of more than £5.1 million
• have more than 50 employees

A simplified test also applies to some clients. Rules apply if you have an annual turnover of more than £10.2 million and are not:

• a company
• a limited liability partnership
• an unregistered company
• an overseas company

There are also rules which cover connected and associated companies. If the parent company of a group is medium or large, their subsidiaries will also have to apply the off-payroll working rules.

From 6 April 2021, companies determine the employment status of each worker that operates through their own intermediary, even if this is through an agency.

The companies should use a Status Determination Statement (SDS) which is then passed to the worker/contractor or agency you contract with. The SDS can be issued in advance of 6 April 2021 if relevant.

Workers will be required to keep records of these status determinations, including the reasons for the determination and fees paid.

If you are the fee-payer (the company paying the worker) and the off-payroll working rules apply, you will be required to deduct and pay tax and National Insurance contributions to HMRC.

IR35 HMRC resources

Read the details from HMRC about the changes to off payroll working for clients.

More information to help you understand off payroll working rules can be found here.

You can check employment status for tax via HMRC.  

Accountants Oxted

Our team of accountants based in Oxted offer an advisory service and can help you manage the rules and regulations as well as help you to understand processes to ensure that no financial penalties are incurred to your business. Get in touch.