THE Off-Payroll Working rules, commonly referred to as IR35, are due to change for the private sector from April 6, 2021. The new rules were originally due to begin in April 2020, but were hastily deferred in March by 12 months due to the sudden impact of COVID-19.

The aim of the IR35 rules when originally introduced was to ensure that individuals who work like employees but operate via an intermediary, commonly their own limited company, pay broadly the same income tax and national insurance contributions as an employee.

Under the existing rules, it is for the individual’s own personal service company (PSC) to determine whether they should be treated as a deemed employee and therefore whether income tax and national insurance should be deducted from payments they receive for their services. HMRC has long considered that there is widespread non-compliance with the current rules.

The new rules which are due to come into force from 6 April 2021 shift responsibility for determining employee status for tax purposes on to the medium and large private sector businesses who engage the worker’s services (referred to as the end client).

Details of the changes include:

- Responsibility for determining deemed employment status shifts to the end client

- Responsibility for making any tax/NIC deductions moves to the “fee payer” (the entity that pays the PSC invoices)

- Small” businesses are exempt from the new rules (and the existing IR35 rules continue to apply)

- Status Determinations Statements (SDS) must be issued by the end client to the PSC/agency

- A new dispute resolution process applies if the worker/PSC disagrees with that SDS

- Failure to adhere to the rules and take “reasonable care” could mean transfer of liability to the end client

- HMRC have updated their guidance and ‘Check employment status for tax’ (CEST) tool ahead of the new rules

Employment Status and IR35 can be complex, and we would recommend you always seek professional advice.