New off-payroll working rules in the private sector (IR35) come into effect on 6 April 2021
The IR35 rules require that PAYE and NIC be paid by those who provide services to a client through an intermediary if that person would be regarded as an employee of the client. This scenario usually occurs through the use of a personal service company (PSC). Currently, where a private sector business engages a contractor through a PSC, it is the contractor’s responsibility to decide whether IR35 applies and to pay any employment taxes.
From 06 April 2021 engaging businesses will be made liable for determining whether the IR35 rules apply. They will also be required to operate PAYE and pay employers’ National Insurance contributions.
The changes will not apply to small businesses which engage contractors through PSCs. Small businesses are those who meet two or more of the following criteria
- a) fewer than 50 employees,
- b) less than £10.2m annual turnover
- c) a balance sheet totalling less than £5.1million.
Haslers have been assisting clients prepare for the changes by reviewing existing contractual arrangements and advising on putting in place systems and processes to administer the new rules.
HMRC have confirmed there will be a soft-landing approach to penalties in the first year of the new rules but those impacted should address the issue and not assume it will be delayed again. Contact us for assistance.
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