Changes to off-payroll working
rules (IR35)
Some important changes to
employment taxes come into effect from 6 April 2021.
Are you affected?
You are affected by the changes
to the off-payroll working rules (IR35) if:
- You are a contractor who works through an
intermediary, e.g. your own limited company, often known as a personal
service company (PSC), and
- You provide your services to public
sector organisations or medium or large-sized organisations outside of the
public sector.
A medium or large-sized
organisation will have a turnover of more than £10.2million, a balance sheet
total of £5.1m and/or more than 50 employees.
What is changing
From 6 April 2021, medium and
large-sized organisations outside the public sector become responsible for
deciding the employment status of contractors for tax purposes.
This ensures consistency with
the public sector, where these arrangements have been in place since April
2017.
How the changes affect you
If you are affected, the
organisation you are providing your services to will determine your employment
status for tax purposes. Your hirer will give you a ‘Status Determination
Statement’, which will set out the determination your hirer has made and the
reasons behind this. You may be asked to provide the hirer with some
information to help them make their determination.
If they determine that you are
employed for tax purposes, they (or the agency they have hired you through)
will pay the necessary tax and National Insurance before they pay you
("inside IR35").
If they determine that you are
self-employed for tax purposes ("outside IR35"), you will remain
responsible for meeting your tax obligations.
Depending on your own personal
circumstances the terms of your contract may change. It is also possible that
you will pay additional income tax and NICs if you had not previously been
applying the off-payroll rules (IR35) correctly. However, HMRC will not use
information resulting from these changes to open a new enquiry into earlier
years unless there is reason to suspect fraud or criminal behaviour.
Summary
If you think you may be affected
you should seek a Status Determination Statement from your hirer, and speak to
them to help you understand what this means for you.
You can find further guidance
at: https://www.gov.uk/guidance/april-2020-changes-to-off-payroll-working-for-intermediaries
You may also find it helpful to
use the Check Employment Status for Tax (CEST) tool: https://www.gov.uk/guidance/check-employment-status-for-tax
Important information
These changes do not prevent
people from working through their own intermediary. They do not introduce a new
tax but instead change the way that the tax is collected when a contractor is
inside the scope of IR35 and is regarded as employed for tax purposes.
