Off-payroll

Being off-payroll means that you are paid for work by other means than a typical salary (also known as a payroll). Common examples of being off-payroll include freelance work or sub-contracting, so you would receive payment through an individual invoice, rather than being part of the company’s payroll. If you are working off-payroll for a client, or you hire contractors to work for your business, it’s crucial to understand the rules surrounding tax implications and IR35 to avoid potential penalties and legal issues.

What is IR35?

IR35 is a type of legislation that allows HMRC to collect additional taxes if they consider that a contractor/freelancer could be, in fact, a ‘disguised employee.’

The purpose of IR35 is basically to make companies pay the right amount of tax, such as Income Tax and National Insurance. Off-payroll contractors pay less NI than they would otherwise pay if they were employed by their clients. IR35 was introduced to stop both companies and contractors from exploiting this.

Off-payroll & IR35: What you need to know

Simply being off-payroll doesn’t mean that you’re not an employee. IR35 states that if you’re an off-payroll worker and  treated like an employee, your client must place you on the payroll. You then pay employment taxes for your work.

If you’re off-payroll and are unsure whether you’re a disguised employee for one of your clients, ask yourself:

  • Do you have to do the work personally, or can they send someone else instead?
  • Do you have to carry out any task that an employee would normally do?
  • Does your client get to decide how, when, and where you do the work?

If your answer to any of these questions is yes, then it’s likely you are a disguised employee in the eyes of HMRC.

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