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What is IR35?

In April 2021, HMRC is changing the rules around off-payroll workers in the private sector (commonly referred to as IR35), affecting how tax and national insurance contributions will be calculated for some contractors working through a personal service company.

This has understandably caused some concern amongst workers and businesses.

Read our IR35 Glossary

Why did HMRC introduce IR35?

Since April 2000, HMRC has used IR35 to determine whether off-payroll workers (i.e. contractors) are working under the same arrangements as employees and thus should pay broadly the same tax and national insurance contributions. However, IR35 status was self-assessed by workers.

HMRC says this has led to widespread non-compliance that would cost £1.3 billion by 2023 without changes to legislation.

When did changes to IR35 roll out to the public sector?

In April 2017, HMRC changed the rules around off-payroll workers in the public sector. The liability for determining IR35 status was shifted from the worker to the engager at very short notice.

In a bid to avoid falling foul of the rules, there was a blanket decision across much of the public sector that all off-payroll workers would be deemed inside IR35. This caused many contractors to leave the public sector entirely, with subsequent disruption and delays on public sector projects.

When will the changes to IR35 roll out to the private sector?

The responsibility for determining IR35 status will be shifted from the worker to the engager on 6th April 2021. This along with some minor changes to the public sector legislation will bring the private and public sector in line with each other.

Need Advice on Preparing for IR35?

Whether you are an end client engaging with contract workers, or a contract worker providing services through a PSC, Millbank can help. Please click the appropriate link below:

IR35 Glossary

Personal Service Company (PSC)
A worker’s own intermediary limited company which then supplies the end client with services via the worker (representative)

Fee Payer
Whichever entity pays the PSC fee, e.g. an agency such as Millbank

The end client to which services are being provided by the representative of the PSC

Reasonable Care Policy
While it has not been clarified yet what this is exactly, we expect it will define the process by which the engager determines the IR35 status of workers and how they are treated.

Getting help with IR35

We are here to offer support and advice to any businesses who engage with off-payroll workers and PSCs to help prepare for 6th April 2021. Contact our team now via the form below, or call 01928 751000 or email and we will work with you to mitigate the risks in partnership.

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