Off-payroll working rules from 6 April 2021
The rules for individuals providing services to the public sector via an intermediary such as a personal service company (PSC) changed from April 2017. The new rules shifted the responsibility for deciding whether the intermediaries’ legislation applies, known as IR35, from the intermediary itself to the public sector receiving the service.
During 2017, the government announced plans looking to extend these rules to off-payroll working in the private sector. The new rules were due to come into effect from 6 April 2020 but were delayed until 6 April 2021 because of the coronavirus pandemic.
This means that from 6 April 2021, all medium and large-sized clients will be responsible for deciding the employment status of workers. This includes some charities and third sector organisations.
The changes mainly apply to businesses with an annual turnover of more than £10.2 million (known as the simplified test). If the simplified test does not apply, then the rules still apply if the private sector client meets 2 or more of the following conditions:
- an annual turnover of more than £10.2 million
- a balance sheet total of more than £5.1 million
- more than 50 employees
HMRC has stated that it will focus on ensuring compliance with the new rules, rather than investigating past arrangements (unless they suspect fraud). HMRC has confirmed it will not open a new compliance enquiry into a contractor’s return for tax years before 6 April 2021 in circumstances where:
- a client decides that a contract is within the off-payroll working rules (IR35)
- a contractor changes the way they work from providing and invoicing services through an intermediary entity to now being paid via a client or end user’s payroll
- a contractor ends a contract because they disagree with a client decision on status
This includes any decisions that may have already been made to prepare for the delayed April 2020 changes.