The off-payroll (IR35) rules apply to workers providing their services through an intermediary, usually the workers own personal service company.
The rules ensure that a worker, who would normally be classed as an employee if they were providing their services directly to a client, pays broadly the same tax and National Insurance contribution as employees.

Who does this apply to?
The IR35 rules apply to:
• any worker who provides their service through an intermediary
• an agency who provides workers services through an intermediary
• a client who receives services from a worker through an intermediary
If the rules apply, then tax and National Insurance contributions must be deducted from payments and these must be paid over to HMRC.

What are the rules prior to 6 April 2020?
Prior to 6 April 2020, if you are a worker and your client is in the public sector, then it is your client’s responsibility to decide on your employment status.
In all other cases, it is the intermediaries responsibility to decide on the employment status.

What are the changes from 6 April 2020?
From 6 April 2020, in addition to the public sector, all medium and large size private sector clients will also be held responsible for deciding if IR35 applies.
The rules for small clients in the private sector will not change and the workers’ intermediary will remain responsible for deciding on employment status.

Who IR35 applies to
The IR35 rules will apply to medium and large private sector clients, defined as any private sector client who has an annual turnover of more than £10.2 million. This is known as the simplified test.
You cannot apply the simplified test if you are one of the following:
• a company
• a limited liability partnership
• an unregistered company
• an overseas company
If this applies and you cannot use the simplified test, then IR35 will still apply if you meet two or more of the following criteria:
• an annual turnover of more than £10.2 million
• a balance sheet totalling more than £5.1 million
• employ more than 50 people
If you meet the conditions listed above you must start applying the rules from 6 April 2020.

If you have used the simplified test to determine your eligibility, then you need to apply the rules from the start of the tax year following the calendar year when you meet the conditions.

What you need to do as a client
As a client you will be responsible for determining the status of your workers. You will need to:
• determine the status of the worker for every contract you agree with an agency or worker
• communicate your determination to the worker or agency you contract with
• keep detailed records of all determinations, including your reasons and fees paid
• have processes in place to resolve any disputes over your determinations
If you are the fee payer and IR35 applies then you will need to deduct tax and National Insurance contributions and pay these over to HMRC.
Any small sized clients in the private sector will not have to decide the workers employment status. The responsibility will remain with the worker’s intermediary.

Who to tell of your determination
Whether or not IR35 applies, you will have to tell the agency, worker or other organisation you contract with of your determination. You will be responsible for any tax or National Insurance liability until you communicate the determination to the worker or the party you contract with.

What happens in a dispute over your determination?
If there is a dispute over your determination with the worker or agency you need to review your determination and the reasons for making it. You have to respond within 45 days of the dispute being raised, and during this period you have to continue applying the rules of your determination. If you do not respond within 45 days, then the responsibility for paying any tax and National Insurance contributions will become your responsibility.

The S4B team
S4B (UK) Ltd are a team of chartered accountants based in Maidenhead. We proactively keep our clients up to date with all the latest legislations and tax changes. Give us a call today to see how we can help you on 01628 623444 or email us at [email protected].