The changes to the off-payroll working rules (commonly known as IR35), which came into effect in April 2017 for the public sector, will be extended to the private sector from April 2021. Draft legislation has been issued. The new rules apply to payments made for services provided on or after 6 April 2021. The new rules were due to apply from April 2020 but were postponed in an announcement by the Government in March 2020.
The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and NICs and pay any employer NICs.
Only medium and large businesses will be subject to the 2021 rules, so small businesses will not need to determine the status of the off-payroll workers they engage. A small company is one which meets two of these criteria: its annual turnover is not more than £10.2 million: it has not more than £5.1 million on its balance sheet: it has 50 or fewer employees. For unincorporated organisations it is only the annual turnover test that applies.
In January 2020, the government announced a review of the implementation of the original April 2020 reform, to address concerns from affected businesses and individuals. The government has confirmed the changes will go ahead but: