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Changes to the Off-Payroll Working Rules (IR35)

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If you are a client receiving services from a worker through their intermediary then you have more time to prepare for the planned changes to IR35, which were due to come into force in April 2020. The Off-Payroll Working Rules in respect of the private sector have been deferred until 6th April 2021.

From 6th April 2021 it will be you as the client who bears the responsibility to make an assessment of the working relationship between the client and the individual worker to determine that if there was no intermediary would the status of the worker would be that of an employee of a self-employed individual for tax purposes.

If the status of the individual is deemed to be that of an employee then you as the client would be compelled to make payroll and NIC deductions in addition to meeting employer NIC.

‘Status Determination Statement’ (SDS)

Under the new off-payroll rules you will be required to issue a SDS before any payments are made after the 6th April 2021 or any services are provided. Failure to comply and issue a SDS in respect of the individual could leave you as the client picking up the tab for payroll and NIC deductions as a direct result.


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Andy Boyde – Associate, Employment Law
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Check Employment Status for Tax (CEST)

HMRC have updated their Check Employment Status for Tax (CEST) tool, which subject to no manipulation in order to achieve a favourable outcome, HMRC has agreed to be bound by such a determination. CEST is HMRC’s own online questionnaire from which you as an end client can determine the IR35 status of an individual.

Central to a CEST determination will amongst a number of factors be whether an individual has an unfettered right of substitution and the level of mutuality of obligation between the parties.

A SDS needs to be made in writing, provide reasons for the decision and be carried out using ‘Reasonable Care’. If Reasonable Care isn’t used during their decision-making process, the responsibility for deducting tax and NICs will remain with you as the end client.

So, what is ‘Reasonable Care’?

HMRC have recently published guidance which contains examples of behaviours that would indicate ‘Reasonable Care’ has been taken, which includes:

  • accurately applying and keeping a record of the employment status principles (ESM0500);
  • accurately completing HMRC’s Check Employment Status for Tax (CEST) tool;
  • applying HMRC guidance on determining status;
  • seeking the advice of a qualified, professional advisor;
  • having someone with a good understanding of the work to be undertaken involved in the determination process;
  • checking existing individual determinations to ensure they remain valid / accurate;
  • reviewing the processes being applied and amending for future determinations where necessary;
  • if there are any material changes to a worker’s terms and conditions, or working practices, making a new status determination; and
  • checking and reviewing processes of other parties where one party subcontracts the determination process to another party. The client remains responsible for the accuracy of the SDS even if it subcontracts that responsibility to another party.HMRC’s guidance also provides examples of behaviours which would not constitute ‘Reasonable Care’, which include but are not limited to:
  • determining that every worker who provides their services through an intermediary is caught by the Off-Payroll Rules without giving any consideration to the specific facts of each individual case;
  • determining that the Off-Payroll Rules apply to a large group of workers who have some variations between the work that is being carried out, without giving proper consideration to the different working arrangements for each individual;
  • failing to reconsider determinations where there has been a material change in circumstances;
  • an absence of any proper support or training within the organisation to enable those individuals responsible for making determinations to accurately consider the Off-Payroll Rules;
  • inputting inaccurate information into CEST;
  • failing to take account of all relevant evidence;
  • the person tasked with completing the SDS does not possess the knowledge required to complete it and is not provided with the required level of support; and
  • the client subcontracts the SDS process to another party and does not confirm the accuracy of that conclusion and the reasons for it. So what steps should you be taking to be ready for 6th April 2021?
  • You should carry out an audit in good time of all existing arrangements you have with your contractors or with any agencies.
  • Review the new ‘Off-Payroll Rules’ and how they could impact your business.
  • Put in place robust processes for making a SDS using CEST and seeking specialist advice;
  • Keep written records and any corresponding documentation of how you have arrived at the SDS.


As the guidance states the major shift in the legislation is that: The responsibility for deducting tax and National Insurance is yours until you tell the worker and the person or organisation you contract with of your determination and the reasons for it. If the working practices of the engagement change or you negotiate a new contract with the worker, you need to make sure that you re-check the rules to see if they still apply. An engagement is the specific contract or piece of work that a worker is undertaking. For each engagement, whether the off-payroll working rules apply is determined by the terms and conditions and working practices.


We hope you have found this note useful, if you need advice relating to the IR35 or any aspect of employment law, please get in touch.

Marie Walsh

Director, Employment Solicitor and Mediator

Direct Dial 0113 8874670
Mobile 07736252681
Reception: 0113 3229222
Address: 4 Park Place, Leeds LS1 2RU

Victoria Horner

Senior Associate
Direct Dial: 01138874673

Andy Boyde

Employment Solicitor
Direct Dial: 0113 323 0346 Mobile: 07595 520 508

Emma Cartlidge

Employment Solicitor
Direct Dial: 0113 8874674

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