If you are a contractor/worker providing services through your own personal service company (PSC), you may be affected by changes to IR35 from 6 April 2021 depending on your client.
- You provide services to a public sector organisation of any size. Your client will already be responsible for deciding your employment status for tax purposes and there are additional changes from April 2021.
- You provide services to a medium or large-sized non-public sector organisation. You will no longer be responsible for deciding your employment status for tax purposes – your client will now decide this.
- You provide services to a small non-public sector organisation. Your limited company or other intermediary will remain responsible for considering the off-payroll working rules
From 6 April 2021, all public sector clients and medium or large-sized private sector clients will be responsible for deciding your worker’s employment status. This includes some charities and third sector organisations.
If the off-payroll working rules apply, your worker’s fees will be subject to Income Tax and National Insurance contributions.
If your worker provides services to a public sector client, or a medium or large-sized private sector client from 6 April 2021, they:
- should get an employment status determination from the client, as well as the reasons behind that determination
- will be able to dispute the determination given to them if they disagree with it
Income Tax and National Insurance
If your contractor provides services to a small private or voluntary sector organisation and the off-payroll working rules apply, you (PSC) will be responsible for deducting Income Tax and National Insurance contributions from your contractor’s fees and paying them to HMRC.
The deemed employer will become responsible for deducting Income Tax and employee National Insurance contributions and paying them to HMRC, as well as paying employer National Insurance contributions and Apprenticeship Levy, if applicable, if both:
- a public authority, medium-sized or large-sized client makes the status determination
- the off-payroll working rules apply
The income received by the PSC will already have Income tax and National Insurance deducted. This means that when the PSC pays the worker they do not need to pay Income Tax and National Insurance contributions again on those fees. The PSC can do this by either paying it as:
- a salary through PSC payroll – but do not deduct Income Tax or National Insurance contributions
- dividends – these do not need to be recorded on the contractor’s / worker’s Self Assessment
Further help and guidance is available here.