On 6 April 2021 changes will be made to the off-payroll working rules (otherwise known as IR35).
IR35 is designed to crack down on "disguised employees". It will apply if an individual provides a personal service via an intermediary (such as a personal service company (PSC)) but they would be classed as an employee for tax purposes if they were engaged directly.
The new IR35 off-payroll working rules will require organisations engaging individuals via intermediaries to assess if there is a deemed employment relationship for tax purposes. If the rules apply to the engagement, the individual is treated as a deemed employee for tax purposes and income tax and national insurance contributions must be deducted through PAYE.
The extension of the IR35 off-payroll working rules to the private sector was meant to happen in April 2020 but was delayed by a year. All but small private sector organisations are affected, including those in charity, care and housing sectors.
At our recent Trowers Tuesday Q&A a majority of respondents to our poll felt their organisation was not ready for the April changes. If the IR35 off-payroll working rule changes will affect your organisation, don't delay preparations.
You need to understand the full implications of the new rules for your organisation. Identify how many PSCs you engage, in which part of the business they sit and whether you engage them directly or via an agency. Design and implement robust systems for assessing and communicating IR35 status, and set up a dispute process. Make sure HR, finance, procurement and payroll teams are involved.
If you didn't manage to catch our Trowers Tuesday session on IR35 you can watch it here.
How we can help
We can provide you with the support and advice you require to manage the introduction of these changes. We can also offer the following for fixed fees:
- A meeting to discuss strategic advice on IR35. This might involve considering some of your engagements where the IR35 status isn't clear cut;
- A simple guidance note introducing the IR35 off-payroll working rules aimed at managers;
- A checklist of factors to consider when assessing if an engagement falls within IR35 and a template Status Determination Statement; and
- A template contract with a PSC.
