New laws on IR35 were delayed in 2020 due to the pandemic and are now due in from 6 April 2021.
Not all Organisations will be affected but those that need to understand comply with the rules include:
- Medium & large-sized private sector organisations that engage contractors who work through own limited company /other intermediary
- Employment Agencies & third parties that supply contractors
- Public sector that engage contractors who work through own limited co. /other intermediary
Small private sector businesses will be exempt from the new rules. A company is small if it satisfies two or more of the following requirements:
- Its annual turnover is not more than £10.2 million.
- Its balance sheet total is not more than £5.1 million.
- It has not more than 50 employees.
In addition, a company is always small for its first financial year. Where the small company is part of a larger group of companies, the group turnover and revenue will need to be considered. Non-corporate businesses will be treated as “small” for a tax year if their annual turnover in the financial year ending at least nine months before the start of the relevant tax year was not more than £10.2 million.
HMRC has now published a Policy Paper to support organisations in complying with changes to off-payroll working rules IR35. The new briefing explains the approach HMRC will take for new compliance activity from 6/04/21. It builds on the approach explained in ‘Ensuring the correct tax is paid.’
It is divided into 3 sections:
The Compliance principles are:
- We will support customers who are trying to do the right thing and comply with the rules
- We will help customers meet their responsibilities under the off-payroll working rules
- Where customers make a mistake, we will help them correct it
- We will check that mistakes are corrected
- We will identify and correct non-compliance with the off-payroll working rules
- We will challenge deliberately non-compliant customers
- We will challenge tax avoidance schemes that claim to avoid the off-payroll working rules or otherwise reduce the tax payable
- We will use a specialist team to carry out all our off-payroll working compliance activity
The Briefing is not intended to outline compliance approach for contractors who work through their own limited company/other intermediary. There HMRC will apply the principles set out in Ensuring the correct tax is paid and will work with contractors to get their tax right.
HMRC has also produced a toolkit to find out if a worker on a specific engagement, should be classed as employed or self-employed for tax purposes. This is called the Check employment status for tax (CEST tool) that can be accessed here.
On Friday 19 February 2021 the Supreme Court is due to hand down its Judgment in the highly publicized Uber case. This case revolves around whether the Uber drivers were workers or independent third party contractors. Undoubtedly the Uber case could affect this area.