Off payroll working (IR35) in the private sector ― overview

Produced by Tolley
  • (Updated for Budget 2020)
Off payroll working (IR35) in the private sector ― overview

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Off payroll working (IR35) in the private sector ― overview
  • Overview
  • Who is caught by the rules?
  • What is a small company?
  • Intermediary employers affected
  • Obligations of client
  • Confirm size upon request
  • Assess employment status
  • Communicate employment status
  • Notify the worker and fee payer if client status changes
  • More...

Reforms to the off payroll working rules (IR35) to apply to large and medium sized private sector clients apply from 6 April 2021. Please see the Preparing for off payroll working (IR35) in the private sector guidance note for more on how to prepare for these new rules.

A report (Review of the changes to the off-payroll working rules) was published in February 2020 and has resulted in a number of tweaks to the rules from 6 April 2021 as well as confirmation of HMRC approaches to compliance with the rules.

Overview

From 6 April 2021, where the end client in the private sector is not ‘small’ and uses the services of an individual supplied by an intermediary such as a personal service company (PSC), the client and any other intermediary in the supply chain, such as an employment agency, have to consider whether the large and medium private sector version of the IR35 rules apply.

The definition of ‘small’ and who is affected by these rules is set out in the Small companies ― who is affected by off payroll working (IR35) in the private sector guidance note. In this case, ‘the private sector’ means any entity not considered to be in the public sector and therefore already covered by the rules from April 2017. The private sector therefore includes, for example, the third sector. See the Off payroll working (IR35) in the public sector ― overview guidance note for details of the definition of public sector.

Normally, where a worker provides their services to an end client through an intermediary such as a PSC or an MSC, it is up to the intermediary to decide whether or not the worker would be an employee or office-holder of the client if the worker were engaged directly. If the worker would be an employee or office-holder (often referred to as being ‘caught by IR35’), then the PSC or MSC has to calculate the deemed employment payment which

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