Understanding off-payroll working (IR35)
Off-payroll working rules for clients, workers (contractors) and their intermediaries.
The off-payroll working rules
The off-payroll working rules make sure that a worker (sometimes known as a contractor) pays broadly the same Income Tax and National Insurance as an employee would.
The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.
The rules are sometimes known as ‘IR35’.
Who the rules apply to
You may be affected by these rules if you are:
- a worker who provides their services through their own intermediary to a client
- a client who receives services from a worker through their intermediary
- an agency or other supplier providing workers’ services through their intermediary
There are different rules that apply to those working for a small business and those working for mid or large-sized businesses.
The client is the person who is or will be receiving the services of a worker. They may also be known as the engager, hirer or end client.
A worker affected by the rules may provide their services through:
- a limited company, usually known as a personal service company (PSC)
- a partnership
- another individual
A PSC is not defined in law but typically is a limited company that a worker controls and has some interest in, through which the worker provides their services.
When the rules apply
The off-payroll working rules apply if a worker provides their services through their own intermediary (usually a limited company, often known as a PSC).
The person responsible for determining whether the worker is employed for tax purposes, depends on if the client is:
- in the public sector
- in the private and voluntary sectors
- a small business
In most cases, the client will be responsible for determining the employment status of the worker. However, if a worker provides services to a small client outside the public sector, the worker’s intermediary is responsible for deciding the worker’s employment status and if the rules apply.
The rules about size only apply to clients. All agencies, regardless of size, will have some responsibilities where the off-payroll working rules apply, particularly where the agency is the deemed employer.
Find out about off-payroll working rules for agencies.
Working through an umbrella company
The off-payroll working rules are unlikely to apply if you are employed by an umbrella company.
Find out what umbrella companies are and what they mean for you.
What happens if the rules apply
The party responsible for applying the rules must determine whether the worker is employed for tax purposes. You can use the check employment status for tax (CEST) tool to help you make this determination.
A worker’s employment status for tax determines the taxes the worker and the deemed employer need to pay, depending on whether a worker is determined as employed or self-employed.
The off-payroll working rules apply on a contract-by-contract basis. A worker may have some contracts which are within the off-payroll working rules and some which are not. A contract for the purpose of the off-payroll working rules is a written, verbal, or implied agreement between parties.
If the rules apply, the client is responsible for determining the worker’s employment status for tax, and they should produce a status determination statement (SDS) including the reasons for their determination.
If the worker is deemed to be employed for tax purposes, the deemed employer must deduct Income Tax and employee National Insurance contributions from fees paid to the worker’s intermediary. Employer National Insurance contributions and Apprenticeship Levy, if applicable, must be paid to HMRC by the deemed employer.
Tax avoidance schemes
You may be offered schemes that wrongly claim to get around the off-payroll working rules. Find out how to recognise tax avoidance schemes aimed at contractors and agency workers.
Get more help
You can get help on the off-payroll working rules (IR35) with webinars and resources from HMRC.
You can also get advice to help you comply with the reformed off-payroll working rules.
You can contact HMRC for help with enquiries about the off-payroll working rules.
Updates to this page
Published 22 August 2019Last updated 15 December 2023 + show all updates
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A link to 'Help to comply with the reformed off-payroll working rules (IR35) — GfC4' has been added to the 'Get more help' section.
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Details of the off-payroll working rules prior to April 2021 have been included where appropriate.
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Details of the off-payroll working rules prior to April 2021 have been removed.
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The guidance has been updated to reflect that the off-payroll working rules changed from 6 April 2021.
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Information about a delay due to the coronavirus (COVID-19) pandemic removed.
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This page has been updated to reflect the delay to the changes to the off-payroll working rules until 6 April 2021.
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Information about Help and support for off-payroll working webinars has been added.
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The guidance has been updated with information about tax avoidance schemes aimed at contractors and agency workers that wrongly claim to get around the off-payroll working rules.
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First published.