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Off-payroll working rules (IR35) delay and what that means for organisations and contractors

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Changes to the off-payroll working rules will now apply from 6 April 2021 and not 6 April 2020 as previously planned. This is a deferral of the reform and not a cancellation.

This blog contains some important information your organisation needs to know as a result of the delay.  Please share this with colleagues, clients, members and contractors who may be affected.

This deferral has been announced in response to Covid-19, to help businesses and individuals deal with the economic impacts of the pandemic. Information about further support available can be found on the Coronavirus Business Support page.

Private sector and third sector organisations

The changes to the off-payroll working rules for businesses and third sector organisations will now apply from 6 April 2021.

Until then, contractors working through their own limited company and providing services to non-public sector organisations will continue to be responsible for operating the existing off-payroll working rules.

In 2020-21, organisations in these sectors will not need to determine whether the off-payroll working rules apply, issue status determination statements or deduct income tax and National Insurance contributions (NICs) before paying the fees for any contractors who work through their own limited company.

Contractors who work through their own limited company can continue to have their invoices paid gross of income tax and NICs by clients and agencies. Payroll need only be operated for individuals who no longer provide services for an organisation as a contractor through their own limited company but are now employed directly.

From 6 April 2020, organisations may notice some additional functionality in their payrolling software – the ‘off-payroll worker subject to the rules’ indicator in PAYE RTI. Organisations in the private and third sector should not use this indicator and should not use payrolling software to make payments to a contractors own limited company. Agencies should only use this software for contracts where services are provided to public authorities and fall inside the off-payroll working rules.

Public authorities

This delay means that the current off-payroll working rules in the public sector, introduced in April 2017, will continue to operate as they do now. The planned changes to the rules were due to bring in additional responsibilities for public authorities. For the tax year 2020-21, public authorities will not be required to:

  • produce a status determination statement (SDS) and pass it to the worker and the first party in the contractual chain
  • have a status disagreement process in place.

These requirements will instead take effect from April 2021.

However, from 11 May 2020 there will be an additional requirement on public authorities, or agencies, for contracts which fall inside the off-payroll working rules. The party paying the contractor's company will be required to start using the PAYE RTI 'off-payroll worker subject to the rules' indicator in payrolling software. While there is no requirement to start using the off-payroll worker indicator on RTI submissions from 6 April 2020, this function will be available and may be used from that date.

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