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Off Payroll Working—April 2021 Changes for the Private Sector

What’s the new law all about?

On 6 April 2021, the delayed off payroll working/IR35 rules take effect in the private sector, being brought in to address non-compliance with IR35 in the private sector. The new law:

  • applies when an individual provides services personally to a client/end user via a qualifying intermediary (personal service company, partnership or individual);

  • moves responsibility for determining employment status and deducting payroll taxes to the client/end user.

Do the new rules affect me?

The law affects all UK businesses that use intermediaries other than those in the small business exemption, and requires cooperation along the contingent labour supply chain.

Is “doing nothing” an option?

Not without risking a tax bill, HMRC investigation and bad press.

What must end users do to comply?

  • Use reasonable care to make employment status determination statement (SDS)/IR35 assessments for theircontractors, asking if, absent the intermediary, the nature and conditions of the work would cause the worker to be classed, for tax purposes, as an employee;

  • before first payment, provide a copy of the SDS, and rationale, to the contractor and down the supply chain;

  • implement a process for resolving employment status disputes (and appeals); respond to challenges within the 45 day time limit.

As end users, what steps should we be taking now?

The team: Who will take ownership of off payroll working compliance? Multi-disciplinary: HR, tax, procurement, legal.

Audit of contingent workforce and review of labour supply chains: Who are your contractors and how are they engaged (e.g., directly, through personal service company or umbrella)?

Assess the impact of the new regime: Carry out SDSs and analyse what impact the new regime will have. Do engagements need ending, or renegotiating? Do working practices and arrangements need to change?

Implementing compliance process going forward: How will new contractors be identified? How will working practices be monitored and how will SDSs be kept up to date?

© 2023 Vedder PriceNational Law Review, Volume X, Number 337

About this Author

Jonathan Maude Labor and Employment Law Attorney Vedder Price Law Firm

Jonathan Maude is a Partner at Vedder Price and a member of the Labor and Employment group in the firm’s London office.

Mr. Maude is an experienced and well-respected practitioner working in labor and employment law. He regularly advises across the full spectrum of employment law-related issues in the contentious and noncontentious spheres with a particular emphasis on advising corporate clients on complex strategic human resource-related matters.

Jonathan Maude's practice can be broadly broken down into the two areas...

+44 (0)20 3667 2860
Esther Langdon, Employment, LItigation, Attorney, Vedder Price Law FIrm

Esther Langdon is an Associate in the Labor and Employment group in the firm's London office.

Ms. Langdon advises clients on all aspects of employment law, with a particular emphasis on contentious matters before the Employment Tribunal and the High Court. She also advises on the full range of personnel matters, including day-to-day human resources support, disciplinary and grievance issues, reorganizations, restructuring and redundancies.

+44 (0)20 3667 2863