Off-payroll working
Large and medium-sized companies are responsible for determining the employment status for tax purposes of any worker supplying their services to them through an intermediary such as a personal services company (PSC). This process is called ‘off-payroll working’. In such circumstances, there is no IR35 risk for the worker and their PSC, because if the worker is wrongly classified as being effectively self-employed by the engager, it will be the engager that is liable for any payroll taxes that should have been paid.
For accounting periods beginning on or after 6 April 2025, an engager is considered ‘small’ (and therefore not subject to the off-payroll working rules) if at least two of the three following conditions are met:
- Turnover of not more than £15 million (instead of the previous £10.2 million);
- Balance sheet total of not more than £7.5 million (instead of £5.1million);
- Monthly average number of employees of not more than 50 (unchanged).
The threshold changes will have their first practical impact from 6 April 2026, as a company’s size for off-payroll working is determined by reference to the previous year.
Where an engager is ‘small’, the payroll taxes risk still lies with the worker and their PSC under the IR35 rules. The change in limits mean that, from 6 April 2026, there will be more PSCs in this category, so the worker and PSC must be very clear as to which party is meant to assess employment status for tax purposes when entering into contractual arrangements.
If you operate via a PSC but all your work is for very large clients (e.g. banks), these changes will not affect you. However, if you have any questions in this area, please get in touch.