Changes To Off-Payroll Working Rules (IR35)

From April 2021 the new reformed Off-payroll working rules (IR35) are being introduced.  They mainly apply to contractors who provide large or medium companies (their client) with their services via an intermediary. The intermediary is commonly a personal service company (PSC) however it could also be a partnership, a managed service company or an individual.

These rules do not affect small companies. A small company has an annual turnover of not more than £10.2 million, a balance sheet total of not more than £5.1 million and a maximum of 50 employees. A contractor has the legal right to ask a client about its size.

Clients of contractors are now responsible for determining whether the rules apply to each contractor and what their employment status for tax purpose should be.

The contractors found to be inside the Off-payroll working rules should pay similar tax and NI of that of an employee.

The client must provide the contractor with a Status Determination Statement (SDS) this will take into account the contract and the working arrangements.

Outside the payroll working rules

If a contractor is found to be outside the payroll working rules, they would be deemed to be self-employed for the purpose of tax. Their limited company or other intermediary will be responsible for paying the tax due; therefore, tax and NI won’t be deducted by the client.

Contractors are able to check their status themselves by using the CEST tool Check employment status for tax – GOV.UK (www.gov.uk)