Off-payroll working tax rules can apply if a worker (sometimes known as a contractor) provides their services to the client through their own limited company or another type of intermediary. The rules aim to make sure that workers who would have been an employee if they were providing their services directly to the client pay broadly the same Income Tax and National Insurance contributions as employees. These rules are sometimes known as ‘IR35’.
From April 2017, public bodies became responsible for determining whether IR35 applied to contractors providing services through an intermediary, where previously the intermediary or contractor was responsible. This reform was prompted by perceived persistent non-compliance which HM Revenue & Customs (HMRC) estimated cost the exchequer £440 million a year in lost tax revenue. From April 2021, these new requirements were extended to medium and large organisations in the private and third sectors.
With the reforms now taking effect in more sectors, this investigation will look at what lessons HMRC has learned from the public sector implementation of the IR35 reforms.