Off-payroll working for the private sector is on its way

From 6 April 2021, individuals who provide their personal services to medium or large businesses via an ‘intermediary’ will be subject to new tax rules. The practical impact of this is that individuals will possibly not be able to benefit from the tax advantages of receiving income via their own company.

What is an intermediary?

Under the rules, an intermediary is classed as an individual, partnership, unincorporated association or a company, such as a personal service company (PSC).

How it will work

Under these new rules, the medium or large business will be responsible for deciding if they apply by understanding whether the services provided by the individual/company would be considered an employment relationship if provided directly by the individual. HMRC has a Check Employment Status Tool (CEST) available to help businesses decide the status of anyone providing personal services to them.

Once a business has made its decision it must provide the individual with a Status Determination Statement (SDS) setting out the status decision and providing the reasons as to why. Businesses have been advised that they must take ‘reasonable care’ in making the status determination, as if they do not, it will be deemed invalid.

The individual is entitled to dispute the findings and provide evidence to support the incorrect SDS. From the date that the dispute is received the medium or large business will have 45 days to review and either confirm or reverse their original decision.

It is important to note that these new rules apply to amounts paid from 6 April 2021, so they will potentially affect contracts already in place.

Also, the guidance clearly states that these rules will not be in force for small businesses and the individual will still be responsible for determining their IR35 status.

For further information on the off-payroll/IR35 rules, please contact Alan Rolfe on 023 8046 1235.

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