Man sat behind laptop looking thoughtful and surrounded by question marks
Are you getting off-payroll working right?

The off-payroll working rules – or IR35 as they are commonly known – were first introduced over twenty years ago. They aim to prevent businesses disguising an employment relationship by contracting an individual worker through an intermediary – typically a company owned by the worker (a Personal Service Company, or PSC for short). If, removing the PSC from the equation, the worker would be an employee, then the rules apply and tax and NICs are charged as if that were the case.

In the last twenty years, the rules have been through several iterations. In the latest version, if you are a public sector body, or a medium or large business that engages contractors through a PSC or other intermediary, it’s up to you to check whether the rules apply, and ensure tax and NICs are withheld as appropriate from payments made to the intermediary.

Identifying which workers are engaged through a PSC can be difficult enough for many businesses. Things get even more complicated when it comes to applying the highly nuanced and subjective rules on who is, and isn’t, an employee for tax purposes. As a result, it’s easy for businesses to get things wrong, or not meet all of the requirements of the off-payroll working rules.

To help businesses stay compliant, HMRC have recently published Guidelines for Compliance — help to comply with the reformed off-payroll working rules (IR35). This detailed guidance is aimed at those engaging contractors, and sets out practical steps to follow, including:  

  • best practice and examples of good systems and processes; and
  • how to reduce the risk of making an error when determining an individual’s employment status for tax purposes.

If you have any feedback on these guidelines, please send these to [email protected].

 

This article reflects the position at the date of publication (19 December 2023). If you are reading this at a later date you are advised to check that that position has not changed in the time since.    

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