From 6 April 2021, off-payroll working rules (or what many refer to as IR35 rules) are changing to include the responsibility of all medium and large-sized private and voluntary sector organisations to assess the contractor’s employment status for tax purposes. If the rules apply, the organisation paying the contractor’s personal service company will be responsible for accounting for employment taxes and NICs.
HMRC has issued a briefing, which sets out the new rules and can act as a basic guide to understanding what is required to comply with the changes in the law. We have also produced a briefing that summarises the key steps organisations will need to take prior to 6 April 2021 if you engage external contractors - click here.
The key steps required in preparation for 6 April 2021 are:
- carry out an audit of all contracted work or work paid for through intermediaries to assess whether any individual could be a "deemed employee" as per the new rules;
- once "deemed employees" have been identified, issue a "status determination" to all the contracted individuals and the intermediaries giving reasons for the findings. For any ongoing contracts, this needs to be done before the due date for the first payment under the contract after 6 April 2021.
Although on the face of it the off-payroll working rules seem simple, the intricacies and ramifications of the change in the rules on many organisations, who contract work out, are far greater than it first appears. I would encourage all private and voluntary sector organisations to seek professional assistance when carrying out the IR35 audits.
How HMRC will support affected organisations to comply with changes to the off-payroll working rules (IR35) from 6 April 2021 and how it will intervene if customers deliberately don’t comply.