The IR35 rules have been around for over 20 years but those rules have been redrawn and renamed ‘off-payroll working’
These rules have applied in the public sector since April 2017. Since then, public sector engagers (the end client) have determined whether off-payroll working applies to a contract operated by a personal service company (PSC).
From 6 April 2021, this is now also the case for contracts with large and medium-sized private sector engagers. The engager will have to determine whether contracts operated through PSCs fall under the off-payroll rules or not. The private sector off-payroll rules only apply to work performed after 5 April 2021, not to all contractor invoices paid after that date.
If the engager determines that the rules do bite, the contractor’s invoices must be paid under PAYE with tax and NIC deducted, and the engager must pay the employer’s NIC. The entity that pays the PSC (usually the employment agency) is responsible for deducting and paying PAYE and NIC due on the contractor’s fee.
Contractors who only offer their services to ‘small’ private businesses will see no change in their working relationship with their clients.
The engager should tell its contractors whether it is classified as a small entity or not.
HMRC has said it will not impose penalties in the first 12 months where the engager has taken reasonable care to apply the rules correctly. However, it will raise penalties where the engager or other entity in the chain has deliberately not applied the off-payroll working rules.
Individual contractors have little powers or rights under off-payroll working rules other than to ask for a review of the status determination made by the engager.
If you need help with this or any other accountancy, tax and small business issues, get in touch for a no-obligation discussion – see our Contact Us page for how to reach us.
Keeping you compliant | Saving you tax | Helping you grow
Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Whyatt Accountancy and the writer accept no responsibility for any loss arising from any action taken or not taken by anyone using this material.