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Off-Payroll Working - Update for April 2021

26 March 2021

Changes to off-payroll working rules come into effect on 6th April 2021. 

Originally, Off-Payroll working rules were to change in April 2020, but due to the Covid-19 pandemic, the Government deferred the plans for a year. If you are a client receiving services from off-payroll workers through their intermediary, make sure you understand and are ready.

What is off payroll working?

For HMRC purposes, off payroll working, also known as IR35, is where a company receives a service from an individual (such as a worker or contractor) through an intermediary (such as a limited company).

What changes after 6th April 2021?

From this date, all public authorities and medium and large-sized clients will be responsible for deciding the employment status of workers/contractors.  The responsibility for operating the off-payroll working rules shift from the individual’s intermediary to the client organisation or business to which the individual is supplying their services.

What businesses are affected?

Public sector entities and medium and large private sector companies, including some charities, are affected by the new rules if they meet two or more of the following conditions

  • annual turnover of more than £10.2 million
  • balance sheet total (i.e. assets before deducting liabilities) of more than £5.1 million
  • more than 50 employees

Small Companies

While small businesses are exempt from the new rules, they must confirm that they qualify for exemption within 45 days if requested to do so by an individual contractor or PSC.

A business is deemed to be small if, in its two most recent consecutive financial years, it satisfies two or more of the following requirements:

  • It has an annual turnover not exceeding £10.2m,
  • It has a balance sheet total of not more than £5.1m,
  • It had an average of no more than 50 employees for the company’s financial year.

If the relevant criteria are satisfied, the small business exemption applies. This means the individual worker or intermediary must continue to assess and deduct PAYE/NIC as was the case prior to the introduction of the new rules.

For more information on Off-Payroll/IR35 click on: HMRC Guidance.

 

KEYWORD TAGS: IR35 off-payroll Payroll

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