The new rules for IR35, which is another name for off-payroll working, will hit businesses from the private sector from 6 April 2021. They should have been in place in April 2020 but have been held back due to the COVID-19 crisis. These rules have been live in the public sector since April 2017. In a nutshell the changes mean that it will be the responsibility of the client and not the contractor to determine the employment status of contractors. In the latest article from Caroline Streatfield Bookkeeping, based in Eastbourne, East Sussex we look at what constitutes Off-Payroll working (IR35), why the new rules are being implemented, the main changes, your responsibilities according to the government and how we can help you.
Why are the new rules being implemented?
It was a year ago that Steve Barclay MP, Chief Secretary to the Treasury made an announcement that the Off-Payroll private sector rollout would be deferred for a year. It was made clear that this was a deferral and not a cancellation. The aim is ensure that people who work in a similar way to an employee but through their own limited companies broadly pay the same tax as those employed directly. By implementing the new rules, the tax advantages of individuals providing services via a limited company will be removed.
What Is Off-Payroll working?
This is a term used by HM Revenue & Customs (HMRC) to describe the following situation:
It is when an individual provides their own personal services via their own private company, known as their Personal Service Company (PSC) to an end client where the following test is met: if the worker is actually providing those services directly to the end client, the worker would thereby meet the employment status tests to make them an actual employee of the end client.
- The end-client is responsible for determining if a contract is inside or outside IR35
- Small businesses are exempt from the new rules
- A Status Determination Statement must be provided by the end-client confirming the IR35 status of a contract
- IR35 status dispute is led by the end-client
- The 5% administration allowance is to be withdrawn although it will continue for PSCs working with small end clients
- Employment tax liabilities are transferred to a relevant person who is any party involved in the payment to a PSC
What Constitutes A Small Business?
End clients are classified as small businesses if they meet two of the following criteria for two consecutive financial years:
- Annual turnover of no more than £10.2m
- Balance sheet total of no more than £5.1m
- No more than 50 employees
Your responsibilities from 6 April 2021
You may have Tax and National Insurance responsibilities. This will apply if your worker provides services to a small private organisation and the off-payroll working rules apply. You will then be responsible for deducting tax and National Insurance from your worker’s fees and paying them to HMRC. When it comes to paying your worker, you could find yourself in a situation whereby your income for your worker’s services will have already had tax and National Insurance contributions deducted from them. If your worker provides services to public authority or to a medium or large-sized private sector client and the off-payroll working rules apply, it will mean that when you pay the worker they do not need to pay tax and National Insurance contributions again on those fees.
How can Caroline Streatfield Bookkeeping help you with the new IR35 rules?
Off-payroll (IR35) working is a broad topic and it’s not straightforward determining if the rules apply to you. However, from April 6th 2021 the emphasis will be on you as an employer to determine the contractor status. If you are struggling with off-payroll working, Caroline Streatfield Bookkeeping, based in Eastbourne in East Sussex can help you unravel this complicated status. Call us on 07982 682746 or 01323 885205 or email info@bookkeepereastbourne.co.uk. We will visit your home or workplace, if possible within East Sussex and can also work remotely to cover other locations, which are further afield.
