From April 2021 the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules (sometimes known as IR35) apply will move to the organisation receiving an individual’s services. HMRC has publish guidance on off-payroll working for intermediaries and contractors, and for clients.

Small companies will be exempt which will mean a large number of charities will be excluded. The Companies Act definition will be used – to be small a company must meet two of the following conditions

• annual turnover must be not more than £10.2 million
• the balance sheet total must be not more than £5.1 million
• the average number of employees must be not more than 50.

In response to consultations on this issue, CTG has argued that the definition of turnover should exclude donation and grant income – HMRC has now confirmed that this is the case.

CTG hosts a number of commentaries on IR35/off-payroll working:

• IR35 – don’t get caught out
• Does HMRC understand the off-payroll/IR35 rules?
• Reforms to off-payroll working in the private sector – the story so far and what’s next?
• Off-payroll working rules: what charities need to do to prepare

We understand that a number of charities are now being contacted by HMRC (most likely through their Customer Compliance Managers) inviting them to take part in an educational call regarding the off-payroll changes. Charities that expect to be caught by the off-payroll working rules should look out for a Off Payroll Working Letter like this and an associated “readiness” for off-payroll working questionnaire.

The Government launched a review of changes to off-payroll working rules to address any concerns from businesses and affected individuals about how they will be implemented. The review will determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms, which are due to come into force in April 2021. The Government has also published draft legislation to implement these changes.

Off payroll working guidance

Guidance notes include:

• Understanding off-payroll working (IR35): Off-payroll working rules for clients, workers and their intermediaries.
• Prepare for changes to the off-payroll working rules (IR35): Find out how to prepare for changes to the off-payroll working rules from April 2021. Advice given on how to prepare includes:
  • Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through personal service companies.
  • Determine if the off-payroll rules apply for any contracts that will extend beyond April 2021. You can use HMRC’s Check Employment Status for Tax service to do this.
  • Start talking to your contractors about whether the off-payroll rules apply to their role.
  • Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.

• April 2020 changes to off-payroll working for intermediaries: Understand and prepare for changes to the off-payroll working rules (IR35) if you’re an intermediary and your worker provides services to a client.
• April 2020 changes to off-payroll working for clients: Understand and prepare for changes to the off-payroll working rules (IR35) if you’re a client receiving services from a worker through their intermediary.
• How to calculate the deemed employment payment: Calculate the deemed employment payment for private sector engagements where the off-payroll working rules (often known as IR35) apply.
• Fee-payer responsibilities under the off-payroll working rules: Check if you’re the fee-payer and what your responsibilities are if the off-payroll working rules (IR35) apply.
• Private sector off-payroll working for intermediaries: Find out about the off-payroll working rules (IR35) if you’re an intermediary and your worker provides services to a private sector client.
• Public sector off-payroll working for intermediaries: Find out about the off-payroll working rules (IR35) if you’re an intermediary and your worker provides services to a public sector client.
• Off-payroll working for agencies: Find out about the off-payroll working rules (IR35) for agencies, when the changes to these rules apply and how the changes will affect you.
• Private sector off-payroll working for clients: When to apply the off-payroll working rules (IR35) if you receive services from a worker through their intermediary.
• Public sector off-payroll working for clients: Find out how off-payroll rules (IR35) work in the public sector.
• Issue briefing: reform of off-payroll working rules: further information on the reforms to off-payroll working rules and the support that HMRC is putting in place to help organisations prepare.