What is Off-Payroll Working (IR35)?
Orignal Article: What is Off-Payroll Working (IR35)?
Understanding the rules of off-payroll working for clients, workers (contractors) and their intermediaries.
The Rules of Off-Payroll Working
When a worker (sometimes known as a contractor) provides services through their own limited company or another type of intermediary to the client, the off-payroll rules apply here.
Most of the time the intermediary is the worker’s own personal service company, but the following can also be:
- A Partnership
- A Personal Service Company
- An Individual
The rules ensure that the workers’ pay the similar amount of same Income Tax and National Insurance contributions as employees, when providing the similar services as an employee directly to the client. We sometimes call these rules as ‘IR35’.
The organisation (client) who is or will receive the services of a contractor, we may call them as the engager, hirer or end client.
Following are the changes will apply from 6th April 2017.
It is the responsibility of the public authorities for deciding if the rules applied where the contracted workers who provide services through their own intermediary.
Following are the changes will apply from 6th April 2021.
The entities responsible for deciding when the rules outside the public sector are public authorities and medium and large-sized clients.
If the client is a small organisation (outside the public sector) receiving the services of a worker, the worker’s intermediary is party that decides the worker’s employment status and if the rules apply.
Get help on the off-payroll working rules (IR35) with webinars, guidance and resources from HMRC.
You may be offered schemes that wrongly claim to get around the off-payroll working rules. Find out how to recognise tax avoidance schemes aimed at contractors and agency workers.
The rules apply to these entities
The rules may affect you, 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.
The Income Tax and the employee National Insurance contributions, if the rules apply one must deduct the amount of contributions from the fees that will you have to pay to HMRC. If the employer National Insurance contributions and Apprenticeship Levy apply, the person who pays the worker’s intermediary is responsible to make payment to HMRC.
When you are not sure if the off-payroll working rules apply, you can Check Your Employment Status for Tax.
The tax amount that the worker and client, or the person paying the worker’s intermediary need to pay, they determine it by the individual’s employment status of the worker (employed or self-employed).
Following are the changes will apply from 6th April 2017.
When a worker provides their services to a client through an intermediary, the rules will apply. But if they are contracted directly, we will class them as an employee.
For the purpose of the off-payroll working rules, there can be a written, verbal or implied agreement contract between the 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.