How April 2021’s changes to IR35 off-payroll rules affect you, and what you can do about it

IR35 legislation is designed to ensure that contractors pay the same tax and National Insurance contributions as employees do. Previously, it’s been the responsibility of contractors to ensure they’re compliant, but that’s about to change. From the beginning of April 2021, determining a contractor’s employment status will become the responsibility of the companies that contract them. If it is determined that off-payroll rules (IR35) apply to the contractor in question, then end-user companies that ignore them could be hit with hefty penalties and extra tax liabilities.

Determining whether a contractor comes under IR35 or not is not always easy. In principle, the rules apply when a company contracts a worker through an intermediary (Personal Service Company) firm who would be classed as an employee if they were contracted directly. Public sector authorities already shoulder the responsibility for determining whether their contractors come under this legislation, and now private sector firms will join them. You may, of course, determine that your contractors do not come under IR35 rules… but if so, you must ensure that “reasonable care” was used in that determination, otherwise HMRC will treat it as an invalid decision.

Although the private sector is being brought into line with the public sector, not all private companies will be expected to participate. Only medium to large businesses will be liable. If two or more of the following apply, then your company is deemed large enough to come under new IR35 legislation:

• Turnover greater than £10.2 million
• Balance sheet total of more-than £5.1 million
• Fifty or more employees

Small businesses do not need to worry about new IR35 laws. However, there may be exceptions. IR35 presents a new threat to your business that is easy to navigate – but costly for those firms which don’t get it right. At JW Hinks, our experienced team are prepared for these changes, and can help walk you through all of your obligations. That way, we can ensure that our clients don’t get stung with any nasty surprises. To contact us and find out how we can help, call 0121 456 0190.