IR35 regulations update: off-payroll working

What does it mean to me as a contractor?

Our summary guide on off-payroll working (IR35) and what it means to you as a contractor. The government plans to introduce this new legislation from April 2020.

Commonly known as the “IR35” regulations, the changes will apply to medium and large private sector businesses that engage workers through intermediaries. It’s worth noting, the new rules will not affect small businesses that engage off payroll workers with the current rules still applying. The definition of an intermediary is wide ranging and can include personal service companies (“PSC”), partnerships (including LLPs), managed service companies and even an individual.

The fundamental rules on whether a worker will be subject to these new regulations has not changed. The major change relates to which party is required to make the decision on whether the worker should be subject to the off-payroll regime and who is responsible for deducting the relevant income tax and NIC.

The client will need to determine if the worker would be an employee if they had been  engaged directly.

The client will need to document the reasons why they have reached their decision and provide a Status Determination Statement (“SDS”) to the organisation who supplied the worker, usually an agency or the PSC and direct to the worker.

If the client determines that the IR35 rules should apply, the fee payer is required to account for the necessary income tax and NIC deductions, before paying the net amount to the worker.

IR35 off payroll changes banner

Until now the decision and responsibility for confirming with the IR35 regulations has been with the worker/PSC. This will change under the new regulations in April 2020, with the decision making moving to the client or end user and the responsibility of deducting the income tax and NIC moving to the fee payer.

The changes may also affect the contractor prior to this if the current or new contract is due to extend beyond April 2020. It should be noted no tax/NIC deductions will be required until after April 2020.

In simple terms the definitions are:

  • Client/end user – the organisation who ultimately receives the services
  • Fee payer – this generally will be an agency, but can be a PSC, who makes the payment to the worker
  • Worker – individual/PSC who is required to provide the services
Want to know more? Download our summary guide for examples and FAQs
For more information

For more guidance on IR35 rules, please contact Linda Warner, or call us on:

01483 416232