Off Payroll Workers and IR35

You can also find a link to our archived content on IR35, the Journey to April 2021 here.

What can you find on these pages?

Deloitte’s latest insights, key updates and services. The planned introduction of the IR35 private sector rule changes (introduced on 6 April 2021) caused organisations to undertake significant preparations to ensure compliance with the law, with a wide range of outcomes. We aim to inform and support organisations which are:

• End client users of off-payroll workers who removed Personal Service Companies (PSCs) from their supply chain and transitioned to alternative agency worker or employment company alternatives;
• End clients who continue to use PSCs and therefore must comply with the IR35 rules;
• End clients who engage self-employed individuals directly; and
• Intermediaries within the supply chain.

Recent updates

• November 2023 – Calculation of PAYE liability in cases of non-compliance - Following the Consultation in April 2023, the Government has announced it will legislate in the Autumn Finance Bill 2023 to allow HMRC to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary on payments received where an error has been made in applying the off-payroll working rules. As HMRC may not have access to all relevant data the policy will proceed on the basis that they will use their best estimate to determine the amount of tax and NICs to set off. The methodology to be used has yet to be clarified. Please see further details here.

• June 2023 – Consultation regarding umbrella companies – Following the HM Treasury/HMRC/Department for Business and Trade call for evidence in November 2021, the Summary of Responses has been issued alongside a Consultation which proposes options to improve compliance in the umbrella company market, both from a worker rights and tax compliance perspective. The consultation closes on 29 August 2023. Please see further details here.
• April 2023 – Consultation regarding settlements after an enquiry – HMRC has launched a consultation on the potential introduction of an offset mechanism where liabilities arise under the IR35 rules. The consultation proposes that where a worker should have been treated as an employee for tax purposes, a deemed employer may take credit for taxes already paid by the worker or their Personal Service Company to reduce the employer’s subsequent PAYE and NICs liability. The consultation period will close on 22 June 2023. Please see further details here.
  
• November 2022 - HMRC compliance questionnaire – HMRC have started to increase IR35-specific enforcement activity. We are aware that HMRC have issued a detailed questionnaire to a number of clients which is primarily focused on collecting information regarding the business’s entire off-payroll workforce (and not just those engaged through PSCs). This may be used as a starting point for compliance activity/discussions in this area. 
  
• October 2022 - IR35 reforms to remain in place – The government announced that the public and private sector IR35 legislation repeal would not take place, so the current IR35 rules will remain in force beyond 6 April 2023. 
• September 2022 - IR35 repeal – The government announced plans to repeal the public and private sector IR35 legislation with effect from 6 April 2023. In practice, this meant that the compliance obligation to assess employment status and operate PAYE moved from current end client engagers/ fee payers, back to individuals operating via personal service companies (PSC). See here for further details: TaxScape | Deloitte | IR35 reversal.
  
• December 2021 - Call for Evidence on Umbrella Company Market - A Treasury/HMRC/BEIS Call for Evidence on the umbrella company market was issued. The publication sought to gather insights on a number of the areas (e.g. including provision of employment rights, potential legislation to regulate umbrella companies and tax non-compliance). 
• October 2021 - New HMRC Umbrella company guidance – HMRC introduced guidance highlighting the risk of using umbrellas who operate tax avoidance schemes for hirers and agencies. The guidance targeted connection to the more serious areas of non-compliance (disguised remuneration and mini-umbrella fraud) and strongly raises the potential consequences (compliance checks, liabilities, penalties). It also raised the potential for penalties for enablers of tax avoidance.
• September 2021 - Off payroll worker survey *now closed* – Please participate in our off-payroll worker survey, aimed at collecting market information in order to identify pertinent trends and insights which can be shared back with you. To access the survey, please click here.
  
• June 2021 - A new labour market Single Enforcement Body – Government re-affirms commitment to create a single body to enforce employment rights and regulate umbrella companies. To access our Fair Pay: Strategy & Compliance page, please click here.
  
• June 2021 - The transition to employment companies (umbrella arrangements) – what you should know and how to best avoid fair pay governance issues. For more information, please click here.
• June 2021 – Deloitte off payroll worker risk diagnostic – gold standard ‘what does good look like’ methodology to test post 6 April 2021 IR35 governance. For more information, please click here.
• May 2021 – Global Contingent Workforce – Deloitte Client Insights - Deloitte Tax Ventures and Deloitte Global Employer Services teams conducted interviews with key global clients during March 2021 to better understand the needs and challenges around the management of Contingent Workforces. Please click here to see the output.
• March 2021 - The Spring Budget: From an IR35 perspective, further changes were announced that impact individuals supplying their services through an intermediary, such as a personal service company (PSC) or an umbrella company, and who would be employed if engaged directly. The technical changes have been made to make sure the off-payroll working legislation operates as intended. The changes were enacted on 10 June with retrospective effect from 6 April 2021 and:
  • Address an unintended widening of the conditions where an intermediary is a company;
  • Improve the operation of the rules by extending the provision of information to the intermediary, as well as the worker; and
  • Improve the operation of the rules by extending the consequences of providing fraudulent information to any UK-based party in the labour supply chain.

Our Services

• Off payroll worker risk diagnostic – a gold standard ‘what does good look like’ methodology to test post 6 April 2021 IR35 governance. For more information, please click here.
• IR35 HMRC enquiry response and litigation assistance – we have significant experience with supporting clients to successfully manage and respond to HMRC status enquiries across sectors.
• Supply chain compliance & fair pay diligence – a supply chain risk assessment on pay governance and employment rights to help you ensure your workforce is treated fairly and you avoid potential reputational consequences of supply chain non-compliance.
• Technology solutions – our off-payroll worker workflow management tool and PSC identification checker. For more information, please click here.
• Employment law advisory/defence of tribunal claims – in the event of court action, we have significant experience of successfully supporting clients through the litigation process.
• Employment Law status of contractors – advising on the employment rights of contractors (for example their ability to bring unfair dismissal or discrimination claims or claims for other employment rights, such as holiday pay and sick pay) and their contractual arrangements and entitlements.
• IR35 Contracting – legal/employment law risks – advising on IR35 legal risk in supply chain arrangements, drafting contractual protections whether operating inside or outside the scope of IR35, concluding agreements with umbrella companies and agencies and dealing with risk under the Agency Workers Regulations, TUPE and other similar legislation.
• Global contingent workforce – we support clients managing global contingent workforces navigate a range of challenges, including key priorities such as talent access, workforce planning, strategy, compliance and cost.
• IR35 status assessments – We provide technical advice on complex employment status tax matters, including support with resolving ‘undetermined’ or inconclusive cases, as well as offering wider outsourced services in this area. For more information, please click here.
  

Please do get in touch with any of the contacts below to discuss your off payroll workers further.