Preparing for off payroll working (IR35) in the private sector

Produced by Tolley
Preparing for off payroll working (IR35) in the private sector

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

  • Preparing for off payroll working (IR35) in the private sector
  • Private sector clients
  • Decide whether the rules apply to you
  • Identify off payroll workers
  • Design and implement process for making status determinations
  • Status disagreement process
  • Compliance in the supply chain
  • Training employees
  • Communication from the client
  • Intermediaries and fee payers

For the private sector, rules come into force on 6 April 2021 in relation to the engagement of off payroll workers. This was delayed from April 2020 in response to the ongoing spread of coronavirus (COVID-19) to help businesses and individuals.

See the Off payroll (IR35) in the private sector ― overview guidance note for details of the rules and responsibilities of everyone in the supply chain. This guidance note addresses what the next steps are to prepare for 6 April 2021. The rules apply only where both the services are provided and payment are made on or after 6 April 2021. HMRC has published high level guidance on preparing for the rules on GOV.UK.

In the first year, penalties for non-compliance will be charged for deliberate non-compliance with the rules.

Private sector clients

Decide whether the rules apply to you

Private sector clients will first need to assess whether they are caught by the rules. The rules apply where the client is UK resident or has a UK permanent establishment. Those clients based wholly overseas are outside the rules. This also means understanding whether they are considered to be medium or large businesses. This is tested based on whether a business is small. If it is not small, then it will be inside these new rules. To be small, the business needs to meet two out of the three following tests:

  1. annual turnover of £10.2m or less

  2. balance sheet value of £5.1m or less

  3. 50 employees or fewer

However, there are a number of complexities to these rules that depend on the type of legal entity and whether it is in a group or part of a joint venture. There are also further requirements set out in detail as to which tax years these rules apply for. For more, see the Small companies ― who is affected by off payroll working (IR35) in the private sector guidance note.

Clients will also have a legal obligation to respond

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