New changes to off-payroll working rules (IR35)

Off-payroll working rules (IR35) are set to change on 6th April 2021. From this date the rules will change regarding engaging with individuals through personal service companies. These changes will effect medium and large sized businesses, as well as all public authorities. Under the new changes, organisations will be responsible for determining whether the off-payroll working rules apply, when receiving an individual’s service.

Off-payroll working rules are in place to ensure that individuals who undertake work similar to an employee, but through their own limited company, pay the same amount of income tax and National Insurance contributions as other employees.

The rules apply to private sector companies and public sector clients that meet two or more of the following:

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

A further simplified test can be applied to some businesses if their annual turnover is more than £10.2 million and are not:

  • A company
  • Limited liability partnership
  • Unregistered company
  • Overseas company

As the responsibility of assessing the individual’s employment status is now with the employer, it is important to note that any failed attempt to make National Insurance contributions, by the deemed employer, can be recovered by HMRC.

For further information regarding the changes to off-payroll working rules get in touch via our contact page and we will be more than happy to help.