In April 2020, the Intermediaries Legislation, otherwise known as IR35, came into effect in the public sector. In April 2021, it came into effect for medium and large businesses in the private sector. The legislation moves the responsibility of assessing whether a worker is caught by IR35 legislation from the worker to the engager (employer).
There is an exclusion for small businesses, which are defined as meeting at least two of the following conditions:
- Annual turnover not more than £10.2M
- Balance sheet total not more than £5.1M
- Number of employees not more than 50
Before the change, our Head of Legislation and Compliance, Paul Chappell, a former Inspector of Taxes with HMRC, gave his advice on handling the responsibility for assessment as a business.
The consequences of getting it wrong
HMRC have been aggressive in pursuing Tax Tribunals relating to the Intermediaries Legislation. In 2020, Paul reviewed cases from the last couple of years. Employment status can be an incredibly complicated topic, and his review found several high-profile cases where famous names had been brought to tribunal by HMRC. In particular, Lorraine Kelly and Christa Ackroyd, although Kelly won and was ruled as being outside of IR35, whereas Ackroyd lost her case and had to pay nearly half a million pounds to HMRC.
Sky Sports presenter the latest celebrity to be caught by IR35
The latest famous name to be caught by IR35 is Alan Parry, a presenter for Sky Sports. Between 2013 and 2019, he was paid through his limited company, Alan Parry Productions Limited, claiming to be self-employed. HMRC viewed this as disguised employment in relation to IR35 legislation.
The case went to a tax tribunal and was overseen by Judge Tony Beare, who ruled in favour of HMRC, resulting in Mr Parry owing over £222,000 tax and £133,000 National Insurance.
There is help available to avoid being on the wrong side of IR35
Off payroll working is a tricky topic to understand and navigate, but there is help out there to guide you on remaining compliant. Our comprehensive guide to IR35 is free to download and gives detail on assessing your worker's status for tax.
We also offer a wide range of consultancy services where our experts, including our Head of Legislation and Compliance, a former Inspector of Taxes with HMRC, can help you to navigate IR35 and other complicated payroll and pension-related matters.