This time last year businesses were preparing for important changes to the off-payroll rules where workers supply their services via their own personal service companies. The start date for IR35 changes was then deferred from 6 April 2020 to 6 April 2021.
IR35 changes for the private sector
The new rules are scheduled to apply to large and medium-sized businesses as defined by the Companies Act. Those businesses will be required to consider whether or not the worker would be regarded as an employee if directly engaged and so deduct tax and national insurance from payments as if they were an employee. This change does not apply where the end user is a small business under the Companies Act rules, where the current IR35 rules will continue to apply.
Thus, small organisations will not yet be required to consider the status of the worker or deduct tax.
What about off-payroll working rules in the public sector?
This change brings the private sector in line with the public sector, where these rules have applied since 2017. Off-payroll rules were first introduced in 2000, to tax contractors similarly to employed workers, removing any incentive to register falsely as a contractor in order to avoid tax. If you’re deemed to be inside IR35, you’ll pay the same PAYE tax an ordinary employee.
You can use the government’s CEST tool to find out if you or a worker should be classed an employed or self-employed for tax purposes.
Contact us if you are affected by these changes as we may be able to help you with the determination of your workers’ employment status. If you are a worker supplying your services through your own company, we will also be able to advise you on the implications of these changes.