Changes to off payroll working (IR 35) from April 2020

The rules covering off-payroll working determine that, if a worker would have been classed as an employee if they were providing their services direct to an end -client, the worker should pay broadly the same tax and national insurance as employees.

Indirect ways of working include working through the worker’s own personal service company but would include using partnerships, managed service companies or other individuals.

The effect of the updated legislation is to extend the provisions of off-payroll working to the private sector.

Before 6 April 2020, if the end-client of a worker is in the public sector, it would be the end-client’s responsibility to determine whether the worker was effectively an employee. If the end-client is in the private sector, it is the intermediary’s responsibility to determine the employment status for each contract.

From 6 April 2020, the implementation of the rules will change. All end clients in the public sector together with medium and large sized end clients in the private sector will be expected to determine whether the off payroll rules apply.

If a worker contracts with a small end client then the intermediary must determine whether the off-payroll working rules apply to the contract.

How do I know if my end-client is small?

The end client will be small if 2 or more of the following applies to them:

• Annual turnover is below £10.2 million

• Balance sheet total is below £5.1 million

• Fewer than 50 employees