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IR35 – are you ready for the changes to off-payroll working?

HM Treasury recently announced a review into the upcoming IR35 reforms in the UK, due to come into effect on 6 April.

There have been no indications from the government that this review (the outcome of which is awaited) will result in a delay to the implementation of the new legislation. Businesses should therefore continue to prepare for the incoming changes.

In case you missed it, changes to the off-payroll working legislation, commonly known as IR35, will take effect in April for private companies in the UK (and have been in effect for the public sector since 2017).

The IR35 rules are designed to prevent perceived tax avoidance where individual workers are engaged via intermediaries – most commonly personal service companies (PSCs) – and do not pay employment taxes on any earnings from the end client.

The two key changes are that:

  1. the ‘end client’ must formally assess whether the individual worker would be an employee/office-holder of the end client had they been directly engaged; and

  2. if so, the organisation in the supply chain that pays the intermediary will be required to include the worker on their payroll, and account for income tax and national insurance contributions (NICs), including employer NICs.

Previously these obligations sat with the PSC and the end-client did not need to worry about these points.

Businesses are taking a variety of approaches in response to the new legislation. The most suitable approach is likely to depend on the existing arrangements with contractors. See our attached PDF for the points that all businesses should be considering in relation to their contractor populations

Freshfields - IR35 briefing
(PDF - 2.5 MB)

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