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IR35

Clio SpringerEditor's message: PAYE generally applies only to employees. However, there are circumstances where individuals who might not immediately appear to be employees are subject to income tax and national insurance contributions (NICs). Where an individual provides their services to a client via an intermediary such as a personal service company (an arrangement known as "off-payroll working"), but the relationship with the client would otherwise suggest employment status, then IR35 (also known as the "intermediaries legislation"), is likely to apply. If it does, the intermediary must operate PAYE and deduct income tax and NICs on salary paid to the individual.

Since April 2017, where the client is in the public sector, it has responsibility for determining if IR35 applies where the individual provides their services via an intermediary. If they would otherwise be regarded as an employee if the arrangement was not through their intermediary, the public-sector client must make PAYE deductions.

The Government intends to introduce the same requirements on private-sector clients from 6 April 2020 (although small businesses will be exempt). The client receiving the off-payroll workers' services will be responsible for deciding the individual's status and operating IR35, rather than the individual who is being engaged. The reforms were proposed by the Conservative administration but if a different Government is formed following the general election, it is quite possible that it would progress the reforms anyway to ensure that private-sector organisations are subject to the same obligations around the collection of income tax and NICs, as organisations in the public sector.

Clio Springer, senior employment law editor

New and updated

  • Date:
    3 December 2019
    Type:
    Legal guidance

    HR professionals in public authorities may think that the extension of IR35 reforms to the private sector in April 2020 will not affect them. However, public-sector bodies need to be aware of some proposed changes to the rules.

  • What is IR35?

    Type:
    FAQs

  • HMRC revamps CEST tool ahead of private sector IR35 rules

    Date:
    26 November 2019
    Type:
    News

    HM Revenue and Customs has updated its Check Employment Status for Tax (CEST) tool ahead of the introduction of private sector IR35 rules next year. But concerns about its accuracy remain.

  • Podcast: IR35 reform

    Date:
    19 November 2019
    Type:
    Audio and video

    We discuss proposed reform of IR35 in the private sector that will have an impact on off-payroll working.

  • HMRC to reform CEST tool ahead of IR35 changes

    Date:
    23 October 2019
    Type:
    News

    HM Revenue and Customs has announced it will make changes to its Check Employment Status for Tax tool, which has been criticised by businesses and contractors alike for inaccuracy.

  • IR35: Time for the private sector to get its house in order?

    Date:
    17 October 2019
    Type:
    Commentary and analysis

    Recent decisions by major employers to bring all contractors onto payroll have ruffled feathers in the contractor community. Six months before IR35 legislation is extended to the private sector, do employers face a talent drain or can they still engage with a flexible, self-employed workforce without facing the wrath of HMRC? Jo Faragher investigates.

  • Date:
    17 July 2019
    Type:
    Legal guidance

    Despite a raft of problems concerning IR35 "off-payroll" rules in the public sector, HM Revenue & Customs last week confirmed that from 6 April 2020, the tax regulations extend to the private sector. Caroline Harwood explains how businesses need to prepare.

  • Pay As You Earn

    Type:
    Employment law manual

    Updated to reflect that the Finance Bill implementing IR35 reforms cannot progress into law at present, as Parliament has been dissolved for the general election.

  • IR35: HMRC publishes private sector tax rules

    Date:
    11 July 2019
    Type:
    News

    Organisations have just nine months to prepare for changes to off-payroll working rules, which are being extended to the private and third sectors, with HM Revenue & Customs (HMRC) publishing draft legislation today.

  • Date:
    24 June 2019
    Type:
    Legal guidance

    Aspects of the IR35 tax legislation, particularly the tests to determine people's tax status, have proved unpopular and many are anxious about its roll out for private sector organisations next year. Ranjit Dhindsa and Matthew Sharp of Fieldfisher explain the issues.

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