23 March 2021

Off-Payroll (IR35)


The off-payroll (IR35) working rules are due to come into force on 6 April 2021 in the private sector following the deferral from last year. But who does it apply to and what impact will it have on your business?

Will the changes affect me?

The changes to Off-Payroll (IR35) rules will affect the following according to the HMRC policy paper:

  • Individuals supplying their services through an intermediary, such as a personal service company (PSC), and who would be employed if engaged directly.
  • Medium and large-sized organisations outside the public sector that engage with individuals through PSCs.
  • Recruitment agencies and other intermediaries supplying staff through PSCs.

Existing rules remain in place if an individual engages through a PSC with a small non-public end-user organisation. This means the decision as to whether the rules apply would still lay with the PSC.

HMRC follow the Companies Act definition in determining whether a business is ‘small’. A business fails to be small if it exceeds two out of three of the following criteria:

  • Turnover above £10.2m
  • Gross Assets above £5.1m
  • Employees above 50

What are the off-payroll (IR35) working rules?

According to the HMRC policy paper:

The aim is to ensure that an individual who works like an employee, but through their own limited company, pays broadly the same Income Tax and National Insurance contributions as other employees. (does not apply to the self-employed)

Will apply to engagements with medium or large-sized organisations in the private and third sectors. Responsibility will shift for operating the off-payroll working rules from the individual’s PSC, to the organisation or business that the individual is supplying their services to or the ‘end-user’.

Engagements with small organisations outside the public sector are exempt, minimising administrative burdens for the vast majority of businesses.

Are you unsure of your employment status?

Use HMRC’s service to find out if you, or a worker on a specific, should be classed as employed or self-employed for tax purposes. Click here.

If you have any questions you are unsure of – get in touch with us at the office!

Back to all news