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IR35 off-payroll working legislation: quick facts, are you ready?

IR35 • Apr 27, 2023 3:47:00 PM • Written by: Georgia Reynolds

Quick facts; are you ready?
The UK economy has faced adverse effects due to the pandemic including a shrinking economy, much higher public spending, and inevitable lay-offs to name a few. With all of this going on, off-payroll working legislation is still set to be rolled into the private sector from April 2021. As a recruitment agency, you’ll probably have questions about the mechanism of this legislation, its risks, and how it may affect your clients.

What is off-payroll working?
Firstly, it is important to understand what it means to be considered as “off-payroll working”. This applies
to your candidates that are operating via their own personal service companies, while providing services
to your clients. A report showed that during the year 2019, there were almost 5 million self-employed
workers in the UK, many of whom are contractors. HMRC believes that often these contractors are disguised employees hiding behind the status of “self-employed”.

Currently, it is the responsibility of your candidates to determine their own employment status by
assessing their contract and working practices against what is known as the IR35 intermediaries’
legislation. An ‘outside IR35’ decision means the contractor pays significantly less tax. HMRC believes the
workers often do not do the assessments correctly. HMRC thinks that nine out of ten times, the ‘outside
IR35’s decisions are incorrect. To avoid this, the government is shifting the responsibility to the hirers. This means that your end clients will be responsible for determining their employment status and passing the decision down the supply chain so the correct payment method can be arranged.

The IR35 off-payroll working legislation was originally going to be implemented in April 2020, but due to the pandemic, it was pushed to April 2021.

IR35 quick facts blog

When do the rules apply?
As an agency, you’ll probably want to know which of your end clients are affected by this. HMRC have

What is changing and when?
The IR35 off-payroll working legislation was originally going to be implemented in April 2020, but due to the pandemic, it has been pushed to April 2021. The government has passed the legislation and it is all set to come into the private sector in April 2021 as planned.

Agencies will need to have a clear understanding of what it means and how the rules apply. At
giant, we provide tailored services and full assistance to help you with everything relating to the
off-payroll working legislation and what it means for your contractors to be inside or outside IR35
including providing engagement solutions for your candidates so future payments to them are compliant with the legislation.

Who do the changes affect?
Now you may be thinking who the rules apply to, and how do you know if the contractors you
engage need to get assessed.
According to HMRC, the off-payroll working legislation does not affect small companies. To be
smart and efficient in its decision, HMRC set the following criteria for a company to qualify as a
“small company”. Your clients need to fulfill at least two of these conditions to be exempt from
off-payroll working
• balance sheet total less than or equal to £5.1 million, or
• annual turnover less than or equal to £10.2 million, or
• less than or equal to 50 employees

What is the impact of these changes?
As the financial and reputational risk ultimately lies with your clients, they will be reviewing their
workforce and how they engage contractors. Our experience from the public sector rollout in 2017
teaches us that companies may choose to no longer engage personal service companies. This means
it’s essential for agencies or any intermediaries to be set up to support a PAYE payroll model. At Giant
not only do we offer an award-winning umbrella solution but can provide both a PEO and fee-payer service to help keep you compliant.

Interested in discussing something you've read in one of our blogs?

Georgia Reynolds

Marketing Coordinator – Content