Off-Payroll Working Rules

As we have advised our network previously, from 6th April 2021 all medium or large-sized private sector clients will become responsible for deciding their worker’s employment status as part of the April 2021 IR35 reforms (more commonly referred to as the ‘off-payroll working rules’). The off-payroll rules received Royal Assent in July last year and were adopted into law by the Finance Act 2020.

Q           So what will change with the new off-payroll working rules coming into force from 6th April 2021?

A            Private sector companies will assume responsibility for determining the employment status of contractors. The change in April 2021 will see status determination shift from the contractor to the end user client.

Q           What private sector companies will the off-payroll April 2021 changes apply to?

A            The government’s guidance confirms that the rules will apply to private sector companies that meet two or more of the following conditions:

  1. they have an annual turnover of more than £10.2 million
  2. they have a balance sheet total* of more than £5.1 million
  3. they have more than 50 employees

*Balance sheet total means ‘the total amounts shown as assets in the company’s balance sheet before deducting any liabilities.’

Q           What if the private sector company is ‘small’ as opposed to medium or large-sized, are they exempt?

A            Using the same conditions set out above a company would be defined as small it meets two or more of the following conditions:

  1. has an annual turnover of not more than £10.2m;
  1. has a balance sheet total of not more than £5.1m; and/or
  1. has not more than 50 employees. 

If you are a small-sized private sector client, the responsibility of deciding the employment status of your workers will remain the responsibility of the worker intermediary (invariably a limited company).

The government’s guidance makes clear that you must however be able to confirm your ‘small’ size if asked by either the worker or by the individual or company that you contract with. Accordingly, you must confirm that you meet the small company exemption within 45 days of receiving such a request. If no response is sent by you, the contractor or worker would be within their rights to make an application to the courts to have the requirement confirmed and enforced by way of an injunction.

Andy Boyde, Employment Solicitor – Consilia Legal