Print

This is a freeview 'At a glance' guide to IR35 and Off-payroll working.

What is Off-Payroll Working? What is IR35? What are the tax rules for Off-Payroll Working or IR35? How do you check employment status? What is a personal service company?

Off-Payroll Working is the term used by HM Revenue & Customs (HMRC) to describe the situation where an individual worker provides their own personal services via a Personal Service Company (PSC) to an End-Client.

The Off-Payroll Working tax rules are essentially anti-avoidance provisions. They aim to ensure that where a worker performs the same kind of work as an employee of the End-Client, any fees paid in respect of the worker's services via the worker's PSC, or if paid directly to the worker are subject to PAYE.

Application of the rules depends on:

There are two versions of the rules:

The Off-Payroll Working rules do not apply if the worker's employment status determination indicates that the worker would not be an employee of their End-Client if we imagine a situation where they were to work directly for that End-Client.

In summary:

The off-payrolling labour supply chain generally looks something like this:

Worker > PSC > Agency > End-Client

There can be numerous agencies or other intermediaries in the chain. e.g.

Worker > PSC > Agency > Agency > Intermediary > End-Client

Worker > PSC > End-Client

Tax outcomes: where IR35 does not apply

Who does what in the chain?

The Off-Payroll Working rules have different variations which apply as follows, depending on the status of the end-client:

End-client type Who assesses the worker's employment status Who deducts PAYE/NICs When from
Public sector  end-client Fee payer 6 April 2017
Large or medium-sized private sector  end-client Fee payer 6 April 2021
Large or medium private sector (IR35) PSC PSC Until 5 April 2021
Small private sector (IR35) PSC PSC Ongoing

 

Off-Payroll Working for Public sector clients

Off-Payroll Working for Large or Medium-sized private sector clients

These now apply from 6 April 2021, having been delayed from April 2020 in March 2020. See IR35 changes postponed for a year due to COVID-19

Off-Payroll Working for Private sector clients

a) Rules up to 5 April 2021: 

b)  Rules after 6 April 2021: 

Who is responsible for notifying who?

It is always the duty of the End-Client to assess employment status and pass on that assessment to the Fee Payer and the worker unless the end-client is a small operation. In that case, the worker's intermediary checks their employment status and applies IR35.

WARNING: If the End-Client or any other party in the chain fails to pass on the results of the employment status test it will become the deemed employer's fault.

How to check your employment status?

What's new?

See a summary of the latest news in our update: Contractors & PSC Planning: November 2019 what now?
This includes a detailed section on working via an 'umbrella' and added some further tips on what you can do with your company if it ceases trading. 

Useful guides on this topic

Personal Service Company (PSC) tax (subscriber guide)
What is a PSC?  What are the tax implications for a PSC?  

IR35: Off-Payroll Working
What is IR35? How does it work? How is the deemed payment calculated? What expenses are deductible?

HMRC employment status tool (CEST)
This tool can be used by workers, agencies and engagers in order to determine whether a worker is employed or self-employed for tax purposes.


Oak ad
Are you enjoying our content? 

Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.

Register with us now to receive our unique FREE Tax Planning Tips and Advice Guide & our FREE OMB Newsletter.