February 24, 2021
As yet, there has been no update as to whether there will be any further delay to the reforms. With the date for change set as 6 April 2021, we look at what the changes entail.
From 6 April 2021, the IR35 tax rules will be extended to medium and large businesses. This means that all public sector and medium or large private sector businesses that engage individual contractors through personal service companies (PSCs) will be responsible for reviewing and deciding on their correct employment status. If the new off-payroll working rules apply then a contractor’s wages will be subject to tax and National Insurance contributions.
For IR35 purposes, all businesses will be classed medium and large businesses unless they have two or more of the following attributes:
not more than 50 employees
a turnover of not more than £10.2 million
a balance sheet not more than £5.1 million
All companies are also classified as ‘small’, rather than medium or large, in their first financial year.
In practice, this means that if the way in which a contractor is working indicates that they aren’t genuinely self-employed but should in fact be classed as an employee or worker, then the companies engaging them will be responsible for deducting tax and national insurance contributions on the payment made to the PSC. This shifts the legal responsibility from the PSC (as is the case under the current rules) to the engaging company. Businesses which fail to comply with the new rules, and fail to deduct tax at source for contractors who HMRC deems should be brought on-payroll, will face significant tax liabilities and penalties.
Businesses will also need to provide a “determination statement” to those of their contractors who are working through a PSC, setting out what the business has determined their employment status to be and why.
As a first step towards complying with the new rules, medium and large organisations should carry out a review of the terms and conditions of their contractors who are engaged through a PSC in order to determine whether they can still be classified as self-employed. Businesses that use contractors through agencies should also liaise with those agencies as part of this exercise. They will then need to consider whether any of their contractors will need to be brought on-payroll.
I have worked with Darwin Gray for a number of years and the level of service, professionalism and timely response is second to none. I would highly recommend Darwin Gray to any business.”
Darwin Gray have provided us with a first-class service for many years now. They really take the time to understand our business and develop relationships which results in advice and support that is contextualised and effective.”
We have worked with Darwin Gray for several years and have always found their services and advice to be first class.”
An extremely professional and sincere company who make time for your queries and understand the need to break down certain facts and information to ensure everything is understood perfectly. I would highly recommend the company to anyone looking for any type of legal advice”
PSS has worked with Darwin Gray for many years. We have always received an excellent service. Prompt and professional advice and support.”
We have used several departments within DG recently and we have been very pleased with an effective, efficient and down to earth service. Very happy thus far and I expect that we will continue to use DG.”
Darwin Gray offer us truly superb services. Very professional, quick and services available bilingually which is very important to us, highly recommend.”
My “go to” in urgent and time sensitive cases for direction, support and advice. The team are quick to respond to calls or emails for advice and support on all matters. Always explain complex matters in a way a lay person can easily understand.”
