IR35 Off-Payroll Reform – A Recap

02 March 2021

As we find ourselves in another National lockdown, businesses may be questioning whether we will see another delay to the implementation of the IR35 Off-Payroll Working changes due to come in from April 2021. This however is wishful thinking as we hear the Government has pledged its commitment to introducing the rules as planned with Parliament having already passed the legislation.  

Having had almost 12 months of battling COVID restrictions and lockdowns, IR35 has been put on the back burner by most but with the job market picking up and businesses potentially looking to engage contractors over staff, given the lessened commitment to them, we have provided a recap of what the changes are and some key movements over the past few months.  

Recap 

These rules will impact medium and large sized businesses in the Private Sector, coming into play from 6 April 2021. This will see responsibilities around IR35 compliance move up the chain away from the individual worker’s own Personal Service Company to the end-user and fee-payer, including the assessment of individual contractor status and operation of tax and National Insurance deductions for those ‘caught’ by the legislation. 

It is important to remember that these rules will only impact individuals who contract via their own PSC and should not be confused with self-employed individuals.  

In order to establish where responsibilities will sit within the supply chain, a review should be completed considering both contractors directly engaged with the business and those who may be sub-contracted through another service company or agency. It is vital that businesses recognise that the obligations do not stop with directly engaged contractors and responsibilities over those indirectly engaged may exist.     

While the above may seem straightforward, the key to success with these changes is to dedicate time and effort into the streamlining of the Company’s practices around the engagement of contractors.  

Overseas Considerations 

One of the burning questions we have seen crop up is what happens if we are contracting with an overseas based client? While many assume this rids them of any requirements under the legislation, this may not always be the case.  

In the original guidance and legislation published by HMRC, it was apparent that the IR35 rules would continue to apply and would fall to the highest UK based company in the supply chain if the end-user was based overseas. However more recently this has been updated to confirm that where the end-user is based wholly overseas with no connection back the UK, the new legislation will not apply and instead it will remain the responsibility of the PSC to determine the worker’s status under IR35, ultimately following the rules as they are currently. 

Similarly, if an individual is non-UK resident carrying out work overseas through their own PSC, assuming no liability to UK tax or National Insurance arises, no action would be required under the new legislation. 

Should you require any support with these changes and how they will impact your business, please do not hesitate to get in touch by contacting Megan McDonald or our specialist IR35 team. Alternatively you can visit our dedicated IR35 page for more information.

 

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