Sponsored content written by Olivia Rawlinson, Tax Director at Armstrong Watson LLP It has been more than 20 years since HMRC introduced off-payroll working rules, but it is now just weeks before they are set to come into force for the private sector.

Known as IR35, the legislation aims to combat tax avoidance by contractors providing their services through a personal service company (PSC) rather than being employed directly. This is because when self-employed, the tax and National Insurance treatment is different to that of an employee.

Owner and directors of PSCs were expected to understand a complex set of rules as well as changes over recent years resulting from successive case laws. If they fell within the IR35 domain, they were expected to pay themselves under the PAYE rules.

The Government then decided that instead of the obligation falling on the contractor/PSC, it should instead lie with the organisation they are working for, and in 2017 this was limited to the public sector only.

Despite fierce opposition to the reforms, the policy was due to be extended to the private sector in April last year but its implementation was deferred due to the significant changes for both businesses and contractors at a time of great uncertainty.

Those 12 months have almost lapsed and businesses who hire contractors or freelancers are now needing to prepare for the changes to avoid disruption, with the policy taking effect from 6th April, 2021.

Businesses need to determine whether off-working tax rules apply to them and, if so should review their current workforce to assess the tax status of contracts. Businesses need to identify individuals supplying their services through their own limited company/PSC or other intermediary, talk to their contractors, advise them of the status determination and help them understand how the changes may affect them.

Businesses will also need to make sure they have a robust audit trail, as it is a legal requirement to keep records. They may also need to consider changes to working practices and contracts.

If you think you might need support or would like more information on how off-payroll working rules will affect your business and workforce, our tax advisers can help.

Please get in touch with Olivia Rawlinson by calling 0739 208 6934 or email olivia.rawlinson@armstrongwatson.co.uk.