Under current legislation, individuals who provide their personal services through an ‘intermediary’ (eg a company, partnership or unincorporated association) are required to assess their own employment status to establish if they are a genuine contractor rather than a ‘disguised’ employee, for the purposes of paying tax. This is sometimes referred to as IR35 legislation.
From 6 April 2020, new tax rules are proposed for individuals who provide their personal services through an ‘intermediary’ to a medium or large business in the private sector.
The effect of these rules, if they apply, will mean medium and large engagers will become responsible for assessing an individual’s employment status and deducting the correct PAYE and National Insurance contributions at source.
Similar rules were introduced in 2017 for public sector organisations receiving services through intermediaries.
The rules will affect both the worker providing personal services through an intermediary, as well medium or large businesses.
The legislation surrounding off-payroll working is complex, however, we have put together the below flowchart, which may help you decide if the new rules will affect you.
If the new rules apply to your business, you will be required to determine a worker’s employment status. Establishing employment status is not straightforward and dependent on a number of factors, mainly established by case law.