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Off-Payroll working from April 2021 & how it could affect you

18.02.2021

Business

Employers must run a PAYE scheme and settle Income Tax and National Insurance Contributions (NICs) on an employee’s pay.
 

Historically, these PAYE costs were often avoided by engaging private contractors directly rather than as employees. 

 

However, anti-avoidance legislation was introduced which treated contractors as employees where the relationship was, in reality, the same as an employment.

 

To avoid this, many engagers required contractors to operate through a Personal Service Company (PSC). Back then, the anti-avoidance legislation did not extend to the engagement of companies. 

 

There was also the added benefit of the contractor being able to extract the profits of their PSC as dividends, subject to lower rates of Income Tax. 

 

Anti-avoidance legislation - IR35

 

HMRC then introduced subsequent anti-avoidance legislation (known as IR35) which effectively treated profits of the PSC as employment income of the contractor and the Income Tax and NIC burden fell on the PSC (and not the engager).

 

The recent introduction of ’Off-Payroll’ working’ largely shifts the risk back to the engager. 

 

From April 2021

 

'Off-Payroll Working' Rules

How can we help?

Contact us on 01223 810 100 - If you are unsure how the ‘Off-Payroll’ working rules will affect you from 6 April 2021

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