IR35 Legislation - April 6th 2021

With the IR35 legislation coming into effect on April 6th 2021, it's important to know how this change in legislation may affect you, whether you are a freelancer or employer.

The IR35 "off-payroll" rules will be extended to the private sector for large and medium-sized businesses from April 2021. 

What is IR35?

IR35 is a tax legislation which first came into force in April 2000 with the aim of preventing tax avoidance amongst workers who supply their services via an intermediary such as a Personal Service Company (PSC). It's also to ensure employers are also fulfilling their National Insurance Contributions (NIC). 

HMRC refer to such workers as disguised employees' as the freelance or contractor doesn't meet the HMRC's definition of self-employment and therefore the correct NIC and income tax isn't always paid correctly.

What are the changes?

The responsibility for operating the off-payroll rules will shift from the individual to the end client (employer), recruitment agency (Major Players) or another third party engaging with the contractor (umbrella company)

A client will be exempt if it meets two of the following criteria:

  • Annual turnover - does not exceed £10.2m 
  • Balance sheet total - does not exceed £5.1m
  • Number of employees - does not exceed more than 50

'Reasonable care' must be taken during the decision process to ensure the IR35 determination status is correct.

Once the determination status has been established, this needs to he communicated with all appropriate supply channels, including the worker. 

For assignments that fall within IR35, Tax and NIC will need to be deducted at source from the workers income by the 'fee payer' - either the employer, Major Players or the umbrella company. Dependent upon pay-type, employers HMRC liabilities are also taken into consideration.

How can we help?

We have developed a determination portal which will provide employers the utmost confidence when determining a role - this can be used for all roles, not just those advertised with Major Players.

We are one of the only agencies that offers multiple payment types to candidates (PAYE, off-payroll and umbrella), ensuring we can advise our candidates and clients on a case by case basis. Plus we can also offer a payroll service for contractors or freelancers, which have been engaged directly. 

Furthermore, clients and candidates will have access to a legal helpdesk which will provide support and a guaranteed turnaround time of 24 hours.