Off-Payroll Working: Reform of IR35 for the Private Sector
When the Chancellor of the Exchequer delivered the Government’s annual Budget statement on 29 October 2018, one of the most significant announcements for larger businesses concerned the future operation of the off-payroll working rules (IR35) for medium and large companies in the private sector. Smaller companies will continue to apply the existing rules. HMRC announced in December 2018 that the definition of a ‘small’ company will follow the provisions set out in Companies Act 2006 whereby a company qualifies as ‘small’ if two or more of the following requirements are met:
- Turnover – not more than £10.2m
- Balance sheet total – not more than £5.1m
- Number of employees – not more than 50
Any company that does not fall within this definition of ‘small’ will be within scope of the new rules.
IR35 is relevant where services are provided to a company (the engager) by a worker’s own limited company or partnership (the contractor). Since 2000, in the private sector it has been the responsibility of the contractor to determine whether the worker would have been an employee of the engager were they to have provided their services directly and if so to subject the remuneration to PAYE and National Insurance Contributions (NIC).