Off-payroll (IR35) – What you need to know as a small business

In April 2020 the ‘off-payroll’ IR35 rules are extended to the private sector and small companies will be excluded, but what criteria to you need to reach to be excluded?

Based in the Companies Act 2006, you are deemed to be a small business if you meet two or more of the following within a 12-month period:

  • Annual turnover – of no more than £10.2 million
  • Balance sheet total – of no more than 5.1 million
  • Number of employees – of no more than 50

There seems to be a grey area for businesses when it comes to employing contractors and temporary staff. Who determines the actual number of employees and where is this information attained? The Companies Act 2006, does little to clarify. The assessment of company size is critical to the law so clarity is being sought by HMRC before the ‘off-payroll’ comes into action.

The Companies Act does allow for small subsidiaries of a large group to be classed as small. Is this a work around? It appears to be on the surface, as it would allow large end users to form small subsidiaries. But is this not just twisting the current Act and adding further confusion to clarifying the size of your business?

Not having a clear guideline of classification is making it difficult for accounting professionals to properly advise their clients as the Companies Act is so open to interpretation.

Until clarification of the guidelines is clearly defined then there will continue to be a grey area. Businesses need to plan for their futures and accountants need the correct information in order to guide their clients. Whether this will be done on a self-certified basis or information on Companies House, who knows at this moment.

Being forewarned is being forearmed so know that this is coming and you will be required to be classed appropriately. You can contact our director, Farah Saddique, to arrange an initial consultation to discuss IR35 matters in detail.


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