Off-payroll working rules (IR35) postponement

3rd June 2020

Off-payroll working rules (IR35) postponement

Changes to the off-payroll working rules will now apply from 6 April 2021, and not 6 April 2020 as previously announced.

This deferral has been actioned in response to Covid-19, to help businesses cope with the financial impacts of the pandemic.

The changes to the off-payroll working rules for businesses and third sector organisations will now apply from 6 April 2021.

Until then, contractors working through their own limited company and providing services to non-public sector organisations will continue to be responsible for operating the existing rules. Contractors who work through their own limited company can continue to have their invoices paid gross of income tax and NICs by clients and agencies. Payroll need only be operated for individuals who no longer provide services for an organisation as a contractor through their own limited company but are now employed directly.

New Rules from 6th April 2021

Some rules already apply to all public sector clients, but from 6 April 2021 medium and large-sized private sector clients also need to apply them. The private sector includes third sector organisations, such as some charities.

The rules apply to all public sector clients and private sector companies that meet 2 or more of the following conditions:

  • have an annual turnover of more than £10.2 million
  • have a balance sheet total of more than £5.1 million
  • have more than 50 employees

Balance sheet total means the total amounts shown as assets in the company’s balance sheet before deducting any liabilities. This is in line with the small companies’ regime.

The reform will place the responsibility for assessing whether IR35 applies onto the private sector end user of the worker’s services, for all payments by medium and large businesses from 6 April 2021. Where it is concluded, by the end client that IR35 applies, the fee payer will become responsible for accounting for and paying the related tax and NIC, including the additional cost of employer’s NIC, to HMRC.

Legislation will be brought in in due course with detailed provisions.

If you require further assistance and advice, please contact our Taxation Team.

About the Author

Geoff Burningham

Tax Associate

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