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Get prepared: IR35 off-payroll working rules from April 2021

Posted: 16th Mar 2021 by Robert Salenius Payroll, Taxation

Big changes to the way contractors and those who work with them pay tax and National Insurance are coming this April.

From April 2021, large and medium sized companies will need to check the employment status of their contractors where their services are being supplied through an intermediary, (usually a personal service company).

You are encouraged to use the HMRC toolkit C.E.S.T. to find out if you, or a worker on a specific engagement, should be classed as employed or self-employed for tax purposes:

If the contractor should be classed as employed , the company will then issue a Status Determination Statement to the contractor. If it continues to be the payer for the services, it will be responsible for deducting PAYE & NIC from those payments.

Many large and medium-sized companies would rather not take on these added responsibilities and, therefore,  ask the agency to take care of any obligations for payment of PAYE and NIC. In turn, some agencies are now advising their clients to use an umbrella company.  The end result is that if the contractor wants to continue to provide a service, he/she will become an employee of the umbrella company. The income will be subject to PAYE and NIC, (after fees have been deducted by the agency and umbrella company). The contractor will declare this income on the employment pages to their personal tax return.

There is further guidance on the HMRC website. This flowchart should help you decide if the new rules apply to you:

Further information can be found here: