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Changes to off payroll working rules

Changes to the Finance Bill introduced in May 2020 included the Government’s proposed amendments to off-payroll working. These changes were due to come into effect from the 6th April 2020, however were postponed until 2021 due to the coronavirus pandemic.

The off-payroll working rules, otherwise known as IR35, are designed to ensure people working in a similar way pay similar amounts of income and National Insurance Contributions.

This means that a person working through their own personal service company (PSC) will pay around about the same tax and NI as someone who is doing the same job but is classed as being directly employed.

HMRC have stated that these new rules will come into effect on 6th April 2021 and will apply to all payments made for services provided on or after this date.

Some of the changes include:

  • A new requirement that the end client must either be a UK resident or have a UK permanent establishment for the new regime to apply
  • Contractors working for a medium, large or third sector organisation will have their employment status decided by the client. If necessary, a ‘Status Determination Statement’ will be provided, which explains the decision and the reasons behind it. The client will be responsible for deducting income tax and NIC’s for contractors.
  • Contractors working for a small business or small third sector organisation will remain responsible for determining their own employment status and will also be responsible accounting and paying any relevant income tax and NIC’s.
  • Contractors are not all self employed – employment status is decided for them based on terms and conditions of the engagement and actual working practices. These off-payroll working rules do not apply to self employed.
  • Clients can not apply a ‘blanket’ rule across all contractors.

For more information, please follow this link – Off Payroll Working Rules.

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