The off-payroll working rules (commonly referred to as IR35) can apply if a worker (sometimes known as a contractor) provides their services through their own limited company or another type of intermediary, to the client.
An intermediary will usually be the worker’s own personal service company, but could be any of the following:
- a partnership
- a personal service company
- an individual
The rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.
The client is the organisation who is or who will be receiving the services of a contractor. They may also be known as the engager, hirer or end client. From 1 April 2021 the client will be responsible for determining if the off-payroll working rules apply.
You may be affected by these rules if you are:
- a worker who provides their services through their intermediary to any public sector body or to a medium or large business in the private sector.
- a client who receives services from a worker through their intermediary.
- an agency providing workers’ services through their intermediary.
The rules apply if a worker provides their services to a client through an intermediary, but would be classed as an employee if they were contracted directly.
A contract for the purpose of the off-payroll working rules is a written, verbal or implied agreement between parties.
The off-payroll working rules apply on a contract-by-contract basis. A worker may have some contracts which fall within the off-payroll working rules and some which do not.
If the rules apply, income tax and National Insurance contributions must be deducted from fees due and paid over to HMRC.
HMRC have issued an on-line tool to allow people to check if they are likely to be caught by these rules. (Check Employment Status for Tax)
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