IR35 – New Off-Payroll rules apply from 6 April 2021

IR35

From 6 April 2021, all medium or large-sized employers in the private sector are responsible for deciding the employment status of the individuals providing services via a personal service company ‘PSC’.

The new rules finally come into force after being postponed due to the Covid pandemic.

The IR35 changes place more responsibility on the private sector, ensuring the worker is correctly classified as either employed or self-employed with PAYE & NIC calculated accordingly.

Currently, tax reliefs and the National Insurance rates for employed and self-employed individuals are different, presenting distorted incentives when claiming employment status. The new rules aim to level the playing field and close HMRC’s ‘tax gap’. 

What the changes mean if the worker provides services to a public sector or medium/large private sector client:

  • They should get an employment status determination from the client and reasons for that determination
  • If the worker disagrees, they can dispute the determination

 If the worker provides services to a small private client or does not receive an employment status determination, different rules apply.

The requirements around off-payroll working are complex and recent court cases have shown it is easy to fall foul of the rules, resulting in potentially large penalties.

After such a long delay, we anticipate HMRC will be keen to ensure the new rules are correctly applied and as such, affected public & private sector clients should urgently review the employment status of workers providing them with services.

How Curo can help you

Our experienced employment tax specialists can help you understand the rules and how they apply to you. Establishing correct employment status is vital in ensuring the correct level of tax are applied under IR35 and we can help you assess the position of your ‘workers’ on gaining a full understanding of the position. Please call us on 01527 558539 or email [email protected].

Please take a look at how we can help with your business tax position.