IR35 – Off-payroll working rules

Published on: 27/12/2023

This factsheet will provide an overview of the current IR35 scheme and set out the proposed changes to the rules due to take effect in April 2021. 

What is IR35?

IR35, also known as off-payroll working rules, was introduced in order to tackle a certain kind of tax avoidance through “disguised employment”. Individuals (such as consultants or contractors) supply their services through an intermediary, usually a Personal Service Company (a ‘PSC’) and pay themselves through a combination of dividends and salary through the PSC. This allows them to avoid paying employee income tax and National Insurance Contributions (‘NICs’).

This also means that the client engaging the worker via a PSC does not pay employer NICs or need to give the worker the same rights or benefits an employee would receive.

The IR35 rules assess whether an individual who is supplying their services through an intermediary is for all intents and purposes an employee of the client engaging them. If so, then they fall “inside” IR35 and will be liable to pay the same income tax and NICs as ordinary employees.