Changes to Off-Payroll Working (IR35) have come into effect from 06 April 2021. These changes were due to come into effect on 06 April 2020 but were delayed until 2021 because of the effects of the Coronavirus Pandemic.
IR35 refers to the One-Off Payroll Working rules that ensure workers completing jobs for companies (and the companies themselves) are paying the correct level of tax.
These new rules affect companies that use named people – who work through their own intermediary – to carry out a piece of work for them, who would otherwise be paid like any other employee. An intermediary will be the worker’s own Personal Service Company (PSC). They could also be a partnership, a managed service company or an individual.
These new rules apply to all public sector clients or private sector companies that meet 2 or more of the following conditions:
- You have an annual turnover of more than £10.2m
- You have a balance sheet total of more than £5.1m
- You have more than 50 employees
You must also apply the rules if you have an annual turnover of more than £10.2m and are not:
- A company
- A limited liability partnership
- An unregistered company
- An overseas company
You will need to decide the employment status of the worker who operates through their own intermediary, even if they were provided through an agency. You should communicate your determination using a Status Determinations Statement (SDS), which must:
- Be passed to the worker and the person / organisation you contract with
- Give your conclusion and the reasons for coming to it
Knowing how to take control of your business finances to maximise profits can be difficult, especially with the current climate. Knowing the common mistakes to avoid can be difficult and can leave you feeling unsure.
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