Off-payroll working / IR35 regulations
Off-payroll working - also known as IR35 rules - are designed to ensure that people working through a Personal Service Company (PSC) would be regarded as employees if they are directly engaged by the client, and pay broadly the same income tax and National Insurance contributions (NICs) as employees.
The Finance Act 2017 introduced reform on how the off-payroll working rules operate in the public sector.
If the rules apply and the public authority is directly engaging the worker’s PSC, the public authority is required to deduct the relevant income tax and NICs before making any payments.
If the worker is engaged through an agency, the public authority will pass on their decision and the agency paying the worker’s PSC is required to deduct the relevant income tax and NICs before making any payments. The party paying the worker’s PSC is also responsible for paying employer NICs for the engagement.
The Autumn Budget 2018 announced the extension of the off-payroll working rules to medium and large-sized organisations in the private sector from April 2021.
The extension does not apply to small organisations that are either:
A small incorporated company (subject to the Companies Act 2006) that meet two of the following criteria:
Fewer than 50 employees
Annual turnover of less than £10.2m
Total balance sheet assets of less than £5.1m.
A small unincorporated organisation with an annual turnover of less than £10.2m.
For more information on IR35 rules, see Off-payroll working (IR35): detailed information - GOV.UK.
Identifying the new starter as an off-payroll worker
Determine if the worker should be treated as a off-payroll employee (also called a deemed employee).
HMRC has a free tool for determining a worker's employment status for tax: Check employment status for tax - GOV.UK.
Inform the worker that you have determined their status and give them the opportunity to appeal.
Recording off-payroll worker status in Cintra People.
In Cintra People Payroll, you can record an employee as being an off-payroll or IR35 workers in your company's payroll for tax, NIC, and apprenticeship levy purposes.
Important: You can only record a person's IR35 /off-payroll worker status when adding / importing them. See Employment details. If an employee's status changes (e.g. they move from being an employee to an IR35 worker) you will need to mark them as a leaver in their existing employee record, then create a new employee record.
Remember, unlike standard employees, off-payroll workers cannot:
Claim statutory payments (such as SSP, SAP, ShPP, SMP, SPP, or SPBP).
Be eligible for automatic enrolment in a pension scheme
Be liable for the deduction of student or postgraduate loans.
For more information, see: Understanding off-payroll working (IR35) - GOV.UK.
When you record an employee as being subject to IR35 rules, their off-payroll working status will be reported to HMRC via FPS transmission.