Off-payroll working rules – IR35

The off-payroll working rules can apply if a worker (sometimes known as a contractor) provides their services through an intermediary. An intermediary will usually be the worker’s own Personal Service Company (PSC), but could also be any of the following:

  • a partnership
  • a managed 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.

These rules are sometimes known as ‘IR35’.

The off-payroll working rules currently apply to intermediaries providing workers to public sector clients. From April 2020, the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules apply will move to the organisation receiving the individual’s services.

You may be affected by these rules if you are:

  • a worker who provides their services through their intermediary
  • a client who receives services from a worker through their intermediary
  • an agency providing workers’ services through their intermediary

If the rules apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC.

Who the rules apply to.

In addition to all public sector clients, from 6 April 2020 the rules will also apply to all medium and large-sized private sector clients (including charities) that meet 2 or more of the following conditions:

  • has an annual turnover of more than £10.2 million
  • has a balance sheet total of more than £5.1 million
  • has more than 50 employees.
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