Main Changes to IR35 rules effective from 6 April 2021
These pages incorporate those changes to the IR35 rules which are effective from 6 April 2021. (Those changes are made by the Finance Act 2020. They do not have retrospective effect.)
An individual who works through a PSC, and any business or other
organisation that engages an individual through a PSC, needs to be aware of
these IR35 rule changes.
Until April 2021, if a PSC’s business client was in the private sector, the
PSC, not the client, had to identify whether its receipt of gross payments
from a client was caught by IR35 as “disguised employment” and, if so, the
PSC had to pay tax and NI under PAYE.
As from April 2017 if the client is in the public sector, it is instead
the client which must identify whether there is “disguised employment”. In
other words, as from April 2017, the responsibility and the tax risk moved
from the PSC to the public sector client. As from 6 April 2021, that risk also moved from the PSC to its private sector business client except
where the client is classified by IR35 as “small”.
If the business client is in the private sector, it is “small” if at least
two of the following apply. (This exception does NOT to apply to a public
its annual turnover is less than £10.2 million;
its balance sheet total is less than £5.1 million;
- it employees number less than an average of 50 in the year.
The size of the PSC and other intermediaries is not relevant for these
If the private sector business client is not “small”, and its determination
is that there is “disguised employment”, it has to operate PAYE, and the
remuneration it pays the PSC must be paid net of tax and NI. If that
business client determines however that it is genuine self-employment, the
business client can pay the PSC the gross remuneration.
If, apart from the PSC there are one or more other intermediary entities,
and the entity paying the PSC is not the PSC’s business client, the payer instead has to operate PAYE and make payments net. Please see the next page
about information requirements (and other IR35 requirements) effective from 6 April 2021.
Although the private sector business client has these responsibilities
(unless it is “small”), the individual and their PSC, in their own
interest, also need to establish the legal position under IR35 and its
consequences to them.
Please also see the Guidance Note for further detail of all 2021 changes.