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Client organisations flowchart - off-payroll working (IR35)

Updated 29 April 2021

Answer these questions to find out if your organisation is affected by the changes to the off-payroll working rules from 6 April 2021.

Question 1

Are you, as the client organisation, in receipt of services from contractors through their own limited company or other intermediary (this could be a partnership or another individual)?

• If the answer is yes, then your organisation may be affected - go to question 2
• If the answer is no, then your organisation is not affected by the rules - you do not need to do anything

Question 2

Do you, as the client organisation, have a UK connection? (That is are you a UK resident or do you have a permanent establishment in the UK?)

Information on what counts as a UK connection can be found within the HMRC International Manual.

• If the answer is yes, then your organisation may be affected - go to question 3
• If the answer is no, then your organisation is not affected by the rules, you do not need to do anything

Question 3

Are you a public sector organisation (public authority) for the purposes of off-payroll working rules?

See guidance within the HMRC Employment Status Manual.

• If the answer is no, then your organisation may be affected - go to [question 4](#question-4]

• If the answer is yes, then you will need to consider the off-payroll working rules for these engagements – go to outcome 1

Question 4

Are you a medium or large-sized, non-public sector organisation?

Check the criteria for what is meant by a medium or large-sized organisation. Find out more information on groups and off-shore entities within the HMRC Employment Status Manual.

• If the answer is no, then your organisation is not affected by the rules.

The contractor’s intermediary is responsible for applying the rules. You may be asked to confirm that you are not a medium or large non-public sector organisation. For more information go to the HMRC Employment Status Manual.

• If the answer is yes, you will need to consider the off-payroll working rules for these engagements.

The off-payroll working rules changed from 6 April 2021. As the client, you will be responsible for determining your contractor’s employment status for tax purposes.

Outcome 1

The off-payroll working rules for public authorities first came into effect in April 2017. For more information go to Public sector off-payroll working for intermediaries and contractors.

The April 2021 changes introduced new responsibilities from 6 April 2021 including:

1. Where the rules apply you must provide a Status Determination Statement to the contractor informing them of their employment status for tax purposes, and also pass the Status Determination Statement to the agency you engage with

2. You must put in place a disagreement process for contractors and agencies to follow if they disagree with your decision

Outcome 2

You must determine your contractor’s employment status for tax purposes and provide them with a Status Determination Statement.

You must take reasonable care in reaching your determination, which should be based on the contract and working arrangements. For more information go to the HMRC Employment Status Manual.

You can use HMRC’s Check Employment Status for Tax tool to help you determine what the contractor’s employment status for tax purposes is.

Where the rules apply, you must provide the contractor with a Status Determination Statement setting out your decision and the reason behind it. You also need to give this to the agency you engage with.

What you need to do next is different if the engagement is inside the rules and the contractor is treated as employed, or if the engagement is outside the rules and the contractor is treated as self-employed.

If the engagement is inside the off-payroll working rules (IR35) the contractor will be treated as employed for tax purposes for that engagement

This means that the party paying the contractor’s limited company (the fee-payer) will usually deduct Income tax and employee National Insurance Contributions (NICs) before the contractor is paid for their services. The party paying the contractor’s limited company will also be responsible for paying employer NICs and Apprenticeship Levy. They will also need to tick the off-payroll worker indicator in RTI. If you do not engage the contractor through an agency, you will be responsible for these actions. You will not be responsible for employment rights.

If the engagement is outside the off-payroll working rules (IR35) the contractor will be treated as self-employed for tax purposes for that engagement

This means that the party paying the contractor’s limited company or other intermediary (the fee-payer) will not deduct Income tax and employee National Insurance Contributions (NICs) before the contactor is paid for their services. They will also not be responsible for paying employer NICs or Apprenticeship Levy.

If the contractor disagrees with the status determination you have provided, they can dispute the decision with you.

You must put a process in place to facilitate this disagreement. For more information go to the HMRC Employment Status Manual.

You should keep records of determinations and the reasons for them.