Changes to the Off-Payroll Working Rules (IR35)
The 6th April 2021 saw the introduction of a significant change to the IR35 rules as they apply to off-payroll workers, primarily those who contract via Personal Service Companies. Deferred by a year due to the Covid pandemic, many businesses could now be caught by the change so action is now required.
The change is not to the IR35 rules themselves, but rather who becomes responsible for determining whether they apply. Until now, aside from the public sector, it has been the responsibility of the contractor company itself to determine the status of any contract. Accordingly, it was they who ran the HMRC risk of any incorrect categorisation.
Now the onus falls on medium or large-sized businesses i.e. the business engaging the contractor. The immediate, almost knee-jerk, reaction to this has been for many contractors to now find themselves on PAYE as the end users seek to de-risk any HMRC action.
As part of this de-risking action, the employing company will have to provide the contractor with a ‘Status Determination Statement’ if the rules apply, setting out and explaining their decision. These should certainly be retained in case of HMRC enquiry.
Further details, including on how to determine if you are a medium or large sized business caught by the new rules can be found here.
Alternatively you can contact the Elman Wall Tax team at 020 7600 5667 or email Lerona Waskar at firstname.lastname@example.org