Changes to off-payroll working (IR35) rules

The off-payroll working rules changed on 6 April. If your clients are not prepared, you can still find support to help get them prepared.

You’ll need to help your clients to comply with the rules if they:

  • run a medium or large-sized non-public sector organisation that engages contractors who work through their own limited company or other intermediary
  • run a public sector organisation (of any size) that engages contractors who work through their own limited company or other intermediary
  • run an employment agency (of any size) that supplies contractors who work through their own limited company or other intermediary
  • are a contractor who works through their own limited company or other intermediary (see additional support you can give to clients who are contractors)

Small non-public sector organisations are not affected by the changes, but you may need to help them understand if they qualify as ‘small.’ If they do, they may need to provide information to their contractors and agencies about their size.

The new rules need to be considered for payments made on or after 6 April 2021, for work carried out on or after 6 April 2021. Payments relating to work or payments made before 6 April 2021 are not affected by the new rules.

HMRC are working with trade representative bodies to run webinars. Sessions have been planned up until May 2021. Your clients may also be offered the opportunity to attend a workshop or a one-to-one advice call, if they need further off-payroll support.

We’ve recently shared posts to our social media covering questions and answers for agencies and contractors, and our compliance approach.

Find out more about how HMRC is supporting affected organisations to comply with the rules, and how we’ll intervene with non-compliance, in our issue briefing.

Additional support you can give clients who are contractors

If your client is a contractor who works through their own limited company or other intermediary, they must consider the off-payroll working rules for all engagements with small non-public sector client organisations.

Some contractors are changing the way they provide their services. You can help these clients by making sure they:

  • consider what to do with their limited company if they’re no longer providing services through it (for example, they may choose to close it down)
  • are not caught out by tax avoidance schemes

Many arrangements for contractors are commercial choices which will be fully compliant with tax law. However, contractors should be aware of artificial arrangements which:

  • claim to avoid the application of the off-payroll working rules
  • result in customers paying less tax than is due

Share our guidance and support with clients to help them prevent being caught out by tax avoidance schemes when changing the way they work.

Guidance updates

We’re continuing to use stakeholder feedback to improve our detailed and technical guidance.

The most recent update included:

  • guidance on technical changes that were announced at the Budget which made sure the scope of intermediaries included in the rules was always as intended
  • guidance on the new Targeted Anti-Avoidance Rule to prevent artificial schemes
  • updates to existing guidance reflecting two technical changes to improve the operation of the rules (none of these changes affect engagements that were already in scope of the rules):
  • the first change allows an intermediary to confirm if one of the conditions for an intermediary is met, where the worker has not done so
  • the second change extends the consequences of providing fraudulent information to include any UK-based party in the labour supply chain
  • updates to existing pages in response to stakeholder feedback, including further details on:
  • when a status determination statement should be issued
  • what constitutes as reasonable care
  • payroll processes
  • calculating statutory payment entitlements
  • various smaller changes to clarify sections of the guidance, based on ongoing feedback

Off-payroll working (IR35) changes to Real Time Information (RTI) payroll and Self Assessment

The off-payroll working rules changed on 6 April.

The new rules need to be considered for payments made on or after 6 April 2021, for work carried out on or after 6 April 2021. Payments relating to work or payments made before 6 April 2021 are not affected by the new rules.

For engagements which are inside the off-payroll working rules, there are changes to payroll and self-assessment which you and your clients will need to understand.

Payroll software changes

If an engagement is inside the off-payroll working (IR35) rules and your client is responsible for deducting Income Tax and National Insurance contributions, they’ll need to use the ‘off-payroll worker subject to the rules’ indicator in PAYE RTI. The name of this indicator may be reflected differently in your software.

Your client may have seen this functionality in PAYE RTI since April 2020. It has been mandatory for the public sector since 11 May 2020 and became mandatory for non-public sector engagements on 6 April 2021.

Contractors (or their own limited company) must not use this indicator under any circumstances.

This indicator must only be used by public sector organisations, medium or large-sized non-public sector organisations, or agencies, who are deducting Income Tax and National Insurance contributions as part of the off-payroll working rules.

If your client has used this indicator incorrectly, make sure they correct this urgently on a corrective full payment submission for the relevant period.

Self Assessment for contractors with student or post graduate loans

Contractors working through their own limited company still need to complete self-assessments if they’re inside the off-payroll working rules and are repaying student or post graduate loans.

Where an engagement is inside the rules and the contractor is repaying student or post graduate loans, they should automatically be registered to complete a Self Assessment return. This return will have a new off-payroll working (OPW) box that will be pre-populated to indicate the return relates to an off-payroll worker. If your clinet think this has not happened, they should register for Self Assessment.

This does not include contractors providing services to small non-public sector organisation, where they need to continue to operate the off-payroll working rules.

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