Guidance

April 2020 changes to off-payroll working for intermediaries

Understand and prepare for changes to the off-payroll working rules (IR35) if you're an intermediary and your worker provides services to a client.

An intermediary will normally be a worker’s personal service company, but could also be a partnership, a managed service company, or another person.

Off-payroll working rules

How the off-payroll working rules are applied will change on 6 April 2020.

Before 6 April 2020, if your worker provides services to a client through you:

  • in the public sector, the client must decide your employment status
  • in the private sector, you must decide your worker’s status

From 6 April 2020, 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 tax and National Insurance contributions.

What the changes mean

If your worker provides services to a public sector client, or a medium or large-sized private sector client, 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

Different rules apply if your worker:

  • does not get an employment status determination from the client
  • provides services to small clients in the private sector

If your worker does not get an employment status determination

This may be because they are providing services to a small client in the private sector, as the rules are not changing for these clients.

If you do not receive a status determination from the client you, as the intermediary, should determine whether the off-payroll working rules apply.

Read more about the off-payroll working rules if your worker provides services to small clients in the private sector.

Your responsibilities from 6 April 2020

Tax and National Insurance

If you make the status determination then you are responsible for deducting tax and National Insurance from your worker’s fees and paying it to HMRC.

As the intermediary, you are responsible for deducting employer National Insurance contributions from fees for your worker’s services.

If the public sector or private sector client makes the status determination, and the off-payroll working rules apply, then the fee-payer is responsible for deducting tax and National Insurance and paying it to HMRC.

Paying your worker

If the off-payroll working rules apply, your income for your worker’s services will have had tax and National Insurance contributions deducted from them. This means that when you pay the worker they do not need to pay tax and National Insurance contributions again on those fees.

You can do this by either paying it as:

  • a salary through your payroll - but do not deduct tax or National Insurance contributions
  • dividends - these do not need to be recorded on your worker’s Self Assessment

As the amounts have already been treated as employment income doing it this way will avoid any double payment of tax or National Insurance contributions.

What to do if your worker disagrees with the determination

Your worker’s client must decide your worker’s employment status and if the off-payroll working rules apply. The client must then tell your worker their determination and the reasons for it.

If your worker disagrees, they’ll need to write to the client to give reasons why.

This should include details of:

  • the employment status determination they disagree with
  • their reasons for disagreeing

Keep copies of any records about disagreements.

The client will then have 45 days from the date of receiving the worker’s disagreement to respond. During that time the client should continue to apply the rules in line with their original determination.

If the employment status determination has not changed, the client will have to tell the worker.

If the employment status determination has changed, the client will have to tell the worker and the fee-payer.

Published 22 August 2019