As of 6 April 2021, medium and large-sized private sector companies will be responsible for establishing the employment status of any workers provided by an intermediary company for tax purposes. If the rules apply, PAYE and National Insurance contributions must be deducted from fees payable and paid directly by the company.

These changes do not apply to companies deemed 'small' by HMRC, specifically companies who fulfil at least two of the following criteria:-

  1. An annual turnover of no more than £10.2 million;
  2. A balance sheet total of no more than £5.1 million; and/or
  3. No more than 50 employees.

Companies are also deemed small for their first financial year.

What should I be doing?

  1. Whilst you cannot and should not seek to 'contract out' of your IR35 obligations, ensure that your contracts are clear in terms of what you intend the relationship to be. Consider your current position (for example, do you incorporate a substitution clause?) and whether you are willing to make any changes to reduce the risk.
  2. You will be responsible for providing an employment status determination, and the reasons behind it, to the intermediary. Ensure that the relevant members of your team are aware of their responsibilities, including the intermediary's right to dispute.

There is no perfect formula for determining employment status and some criteria will carry more weight than others; for example, an individual who has complete freedom over their working day and frequently uses their right to substitute is still likely to be deemed outside of the rules regardless of whether they have attended occasional social events. Should you find that an individual's status is medium risk, or difficult to discern, we recommend seeking further advice before proceeding.

IR35 should be evaluated on a contract-by-contract basis – the fact that a worker has previous fallen outside of the rules does not necessarily mean that this will automatically apply to future circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.