Get prepared: IR35 (off-payroll working) action plan

Big changes to the way contractors and those who work with them pay tax and National Insurance are coming this April. Follow these simple steps to make sure you're prepared.

There are now just under two months until the changes to the off-payroll working rules (IR35) come into effect on 6 April 2021 for all public authorities and medium and large companies.

As a recap, the legislation for off-payroll workers ensures that contractors who are essentially working like an employee but through a Personal Service Company (PSC) (thus paying lower tax rates) are brought in line to pay broadly the same tax and National Insurance as an individual who is employed directly.

From 6 April 2021 the responsibility of assessing off-payroll working (IR35) will be transferred from the contractors themselves, to the medium and large companies. This was brought in for the public sector back in 2017. The rules apply on a contract by contract basis.

Read our in-depth article about the changes and see some examples of what the new landscape will look like in practice here and follow these simple steps to get ready before April.

Companies

To prepare for these changes we suggest you go through the following steps:

  1. Look at your workforce and review contracts
  2. Use the Check Employment Status for Tax (CEST) service to help you decide if the off-payroll working rules apply
  3. Seek professional advice where you are unsure or the CEST service provides an inconclusive result
  4. Liaise with contractors and the agencies you are currently engaged with/will be engaged with from April
  5. Ensure everyone understand the implications
  6. Consider if you may need to operate PAYE
  7. Have a defined process in place to deal with any employment status disagreements

Contractors

Contractors also need to be aware that the way they pay tax going forward may change in April. HMRC have published a flowchart to help them understand whether they’ll be affected by the changes – see here.

When the new rules come into place there will be significant financial implications for many, and as such contractors, in particular, should make themselves aware of illegal tax avoidance schemes.

HMRC has published guides to help spot the signs of tax avoidance scams, so familarise yourself with those to avoid caught out.

It’s important that both sides understand the implications of these changes and take action now.

Support

Whether you’re a contractor or a business looking for help understanding the implications of these changes for you, get in touch today so you’re ready for the new rules being introduced in April.

Our tax and payroll specialists will guide you through what’s coming down the track and help you decide what to do next.

Contact us
Charlie Buxton
Author:
Charlie Buxton Senior Tax Advisor