Find out how our experienced team of accountants and advisors can keep you compliant with the off-payroll rules.

Since April 2021, contractors and private sector businesses that engage their services must comply with IR35 rules.

Under this new regime, the engager (employer) will be responsible for deciding whether to deduct tax and National Insurance Contribution (NICs) from freelancers and contractors, operating via an intermediary, such as a Personal Service Company (PSC), as if they were employees.

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IR35 for businesses

Affected businesses must review each contractor’s status and make a determination on their employment. If the determination results in a contractor being within the IR35 rules, they will need to deduct and pay tax and National Insurance contributions to HM Revenue & Customs via PAYE.

Where an employer fails to correctly identify a disguised employment scheme, the worker’s tax and National Insurance Contributions (NICs) become their responsibility.

These rules do not affect small businesses, as defined by the Companies Act 2006, where they meet two or more of these criteria:

  • Annual turnover is no more than £10.2 million;
  • A total of fixed and current assets (before deducting current liabilities, long-term liabilities and deferred tax provisions) over £5.1 million; or
  • No more than 50 employees.

However, when a business grows from a small to a medium or large-sized business there is a two-year transition period before the IR35 regulations fully apply to that business.

Businesses that are affected by this rule should seek professional help to review their workforce, make accurate determinations and update their payroll processes.

If you want to remain compliant with the IR35 rules, contact us.

IR35 for contractors

Being paid via PAYE means that the tax-efficient methods of payment via PSC may no longer be possible.

Many contractors will, therefore, see a reduction in the amount that they can earn if they are deemed to be within the off-payroll rules, as they could subject to a higher rate of tax and NICs.

It is important that contractors also seek professional advice on this change to understand how it might affect the personal finances and those of their company.

If you are a contractor that needs advice on the impact of IR35, speak to us.

Here to help

If you are struggling to get to grips with the new IR35 requirements, our team of experienced accountant and advisors are here to help.

To find out more about our services, please contact us.