IR35 and off-payroll to on-payroll: changes from 6 April 2021

From 6 April 2021 (previously postponed from 6 April 2020) the new Off-Payroll Working Rules will come into effect. Where workers are engaged through intermediaries (most commonly, personal service companies) will result in organisations undertaking greater administrative burden and potential financial risk to establish the employment status and payroll requirements. This is reform to the existing IR35 rules for the private sector which were introduced in the public sector in April 2017.

In summary, clients engaging via such intermediaries must decide whether the worker is akin to an employee (or office holder) if the intermediary was ignored. Where the worker is considered an employee, income tax and both employer’s and employee’s National Insurance (as well as apprenticeship levy) must be accounted for on the payments made to the intermediary. The introduction of these new rules pass the burden of ensuring the worker’s employment status is correct and accounting for any income tax and National Insurance due, to the organisation engaging where the obligation was previously that of the worker and the intermediary.

The legislation is still to be enacted but these changes are on course to apply to payments made from 6 April 2021.

To assist you and your business with these changes, our detailed guidance note is available by clicking the download button: