IR35
1. The off-payroll working rules (IR35) have changed
The off-payroll working rules are designed to ensure individuals working like employees but through their own limited company (often known as a ‘personal service company’ or ‘PSC’), or other intermediary, pay broadly the same Income Tax and National Insurance contributions (NICs) as individuals who are directly employed.
These rules are commonly known as ‘IR35’.
On 6 April 2021, the off-payroll working rules changed.
For services provided to medium or large-sized client organisations outside the public sector, the changes apply to all payments made on or after 6 April 2021, for all services provided on or after 6 April 2021.
For services provided to public authorities, where the rules first changed in April 2017, the new changes apply to all payments made on or after 6 April 2021, regardless of when the services were provided.
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2. HMRC will focus on supporting organisations to comply with the changes to the off-payroll working rules, rather than investigating contractor’s past arrangements
HMRC will not open a new compliance enquiry into a contractor’s return for tax years before 6 April 2021 in circumstances where:
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A client decides that a contract is within the off-payroll working rules (IR35)
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A contractor changes the way they work from providing and invoicing services through an intermediary entity to now being paid via a client or end user’s payroll
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A contractor ends a contract because they disagree with a client decision on status
This includes any decisions that clients may have made to prepare for the April 2020 changes, which were delayed.
For more information:
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If you contract for a medium or large-sized organisation outside the public sector
From 6 April 2021, your client is responsible for deciding your employment status for tax for the services you provide them. They should provide you with a ‘Status Determination Statement’ if the rules apply, setting out and explaining their decision.
If your client determines that your contract is inside the off-payroll working rules and so you are a deemed employee for tax purposes then your client, or the agency who pays your fees, will also be responsible for deducting Income Tax and Employee NICs before they pay you. They will also need to pay Employer NICs and apprenticeship levy, if relevant, to HMRC.
You may still need to submit a tax return, for example, if you are a student loan or post graduate loan borrower, but relief is available on the tax already paid.
For the tax year 2020 to 2021, your limited company or other intermediary remains responsible for operating the off-payroll working rules and accounting for and paying the relevant Income Tax and NICs