A collection of tax rules and changes come into force from the start of April 2021, including the introduction of off-payroll working (IR35).
Off-payroll working, commonly referred to as “IR35”, is the name of the anti-avoidance legislation that ensures individuals providing services through an intermediary company are taxed correctly.
The IR35 rules which currently apply where services are provided by a worker (sometimes known as a contractor) through a personal service company to clients in the public sector will be extended to the private sector from 6 April 2021.
The main objective of the IR35 rules is that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same Income Tax and National Insurance contributions as employees.
The client is the organisation who is or will be receiving the services of a contractor. They may also be known as the engager, hirer or end client. The client will be responsible for determining if the off-payroll working rules apply.
You may be affected by these rules if you are:
a worker who provides their services through their intermediary
a client who receives services from a worker through their intermediary
an agency providing workers’ services through their intermediary
If the rules apply, Income Tax, employee NI contributions and employer NI contributions must be deducted from fees and paid to HMRC.
You can use the Check Employment Status for Tax service to help you decide if the off-payroll working rules apply.
Before 6 April 2021
If you’re a worker and your client is in the public sector, it’s their responsibility to decide your employment status. You should be told of their decision.
If you’re a worker and your client is in the private sector, it’s your intermediary’s responsibility to decide your own employment status for each contract.
From 6 April 2021
From 6 April 2021 the way the rules are applied have changed:
All public sector authorities, and medium & large sized private sector clients will be responsible for deciding if the rules apply.
If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply.