IR35 – Off payroll working rules guidance for intermediaries.
Matt Walker – 27 April 2021
So what’s changed?
- Off payroll working rules changed from 6 April 2021. Large/medium sized businesses are now responsible for determining the employment status of workers/contractors
- There are no rule changes yet for small businesses with contractors still able to decide their own status for payments.
Am I effected?
- The changes apply to all large and medium sized businesses within the private sector. A business falls into this category if they meet 2 of the following criteria
- Has an annual turnover of more than £10.2 million
- Has a balance sheet total of more than £5.1 million
- Has more than 50 employees
What are the rules?
- The rules apply if a worker is providing a service through an intermediary but would be classed as an employee if they were contracted directly.
An intermediary is a party who makes arrangements for, or pays, an individual to work for a third party. There are broadly 3 categories of Intermediary:
- A limited company (usually know as a personal service company or PSC). This is the perhaps the most common arrangement. A PCS is a company in which the worker has a ‘material interest’ – that is where the individual is a director of the company and controls more than 5% of the ordinary share capital of the company
- A partnership
- An unincorporated body
I work through a PSC for a large/medium sized business – what do I need to do?
- Nothing!! – the company you work for will be responsible for deciding your employment status and will provide you with a Status Determination Statement (SDS).
- If you don’t agree with their assessment of your status you must notify the company – they will have 45 days to respond.
- If the off payroll working rules apply to your assignment with the company, they will set you up on PAYE and will deduct income tax and National Insurance before paying you. They will also pay employer’s National Insurance
I work through a PSC for a small business – what do I need to do?
- As the intermediary you will continue to be responsible for determining the workers employment status to see if the off payroll working rules apply
- Be aware that the same rules still apply to off payroll working – the only difference is the responsibility in determining status
Give me an example
James is a sports journalist from Liverpool. He is engaged through his own PSC to a regional radio station for whom he has presented a Saturday afternoon football phone in show for the last 7 months. The radio station is a medium sized business and has just provided James with a Status Determination Status informing him that the off payroll working rules apply to his contract.
James has used the ‘Check Employment Status for Tax (CEST) tool as Gov.uk and agrees with the radio stations determination of his status (if he had disagreed he would need to notify the station)
The radio station will continue to pay James’ PSC but must now set James up on their payroll and deduct income tax and national insurance on as well as pay employers national insurance
James’ PSC will still need to submit a tax return, but relief will be given for the tax already paid
For more information on the how the off payroll working rules affect your business, get in touch with us today
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