IR35 reforms due to come in from April 2021
 

There is no denying that the IR35 off-payroll rules have presented a challenge to many contractors and intermediaries in recent times. Key to understanding how they work is keeping up with the latest changes to the rules. This makes the amendments due to come into effect from 6th April 2021 crucial to take account of.

What will the April 2021 IR35 changes look like?

In simple terms, the changes will impact how the rules around IR35 and off-payroll working will be applied. As of the 6th April 2021, all medium/large-sized private sector clients and all public sector clients will have to decide their workers' employment status.

If off-payroll rules do apply, NI contributions and tax will be valid on workers' fees. For public sector or large/medium-sized private clients where off-payroll rules apply, the deemed employer is responsible for taking tax and NI off workers' fees - before then paying them to HMRC.

 

                                                                                                       



How does this work in practice?

If any of your workers deliver services to public sector or medium/large private sector clients, they should get a decision on their official employment status directly from the client and the reasons behind it. It is key to note that this employment status can be challenged. Once the client has reviewed the case, they must let your worker know the outcome.

It is also essential to note that different rules come into effect if workers do not receive an employment status from a client or deliver services to small private sector clients. If no decision is forthcoming from the client, your worker can ask them to confirm the size of their operation. The client then has 45 days to get back to them.

But what if the client is a small private sector business? The new rules will not then apply and you as the intermediary will instead have to determine any worker's employment status and decide if off-payroll rules should be applied. If the off-payroll rules are found to apply, you will have to deduct tax and NI from the worker's fees, before paying them to HMRC

Paying workers' fees

Due to the above IR35 changes in April 2021, income derived from workers' services to a large/medium-size private sector client or public sector clients who determine off-payroll rules apply will already have seen NI and tax deducted. In this case, you do not need to make any further deductions and can simply pay workers through your payroll or via dividends.

Get help with the new IR35 changes

Although the proposed changes in this area will hopefully make it easier to navigate, you might still need expert guidance on how it will all work. If you are based in Melton Mowbray and need a professional accountant, get in touch with srb Associates today via the contact form on our website.