Scroll down for more information

IR35 – Off Payroll Working

The IR35 changes were finally rolled out in the private sector in April 2021 after being around in the public sector since 2017, and has profound changes for some employers and contractors. As IR35 specialists, we can explain this ‘off-payroll tax’ and how it might affect you and your business.

Contact Steven Fraser

  • Steven Fraser
    Meet the team

    The team

  • UK entities. SMEs. Privately Owned & Listed Businesses. Overseas entities. Public & Social Sector Organisations.

    Who we can help

  • Payroll. Global Mobility. UK Employment Taxes. Overseas Employment Taxes. Expatriate Taxes. Employee Benefits. Systems & Software.

    How we can help


IR35 is tax legislation that applies to off-payroll working. It’s intended to close a loophole where contractors effectively work as employees, but avoid paying the appropriate tax by working through a limited company.

IR35 was introduced to the public sector in 2017 and has attracted criticism for its complexity. The latest rules to come into effect have not made it any simpler. Nevertheless, there are penalties and sanctions if an HMRC enquiry decides IR35 applies but has not been complied with. Our tax experts can explain the IR35 off-payroll worker rules and talk you through the necessary actions, whether you are the end-client or a contractor.


The IR35 ‘off payroll’ public sector reforms were extended to the private sector from April 2021 onwards, following a delay due to COVID-19. These changes have seen the responsibility for determining whether an engagement falls within the IR35 rules move from the worker’s Personal Service Company (PSC) to the end user (including where PSCs are engaged via an agency).

If the engaging organisation deems that IR35 applies, the end user must apply PAYE/NIC on payments made to those PSCs if it pays them directly. Otherwise, the agency would be responsible for applying PAYE/NIC to those payments, based on the end user’s IR35 assessment.

While IR35 rules currently only apply to large and medium sized enterprises that engage contractors through PSCs, we expect to see them being phased in for small enterprises in future years.


As an end user or agency that engages with PSCs, there are a number of steps you need to take to ensure compliance with the latest rules:

  • Identify potential impacted workers.
  • Assess those contractors to determine which would be deemed to be employees under the status test.
  • Engage with key stakeholders, including legal, tax finance, operations and HR, and agree responsibilities and ownership areas.
  • Estimate any likely cost increases due to Employers NIC and Apprenticeship Levy changes rising under IR35, and potential changes in contractors’ rates.
  • Consider whether tax fee protection insurance should be purchased to protect you in the event of an HMRC enquiry.
  • Design and implement new systems and processes for dealing with those contractors impacted by the changes.
  • Train the relevant internal team on the changes in systems and processes, and ensure they can effectively determine the IR35 status of engagements.
  • Communicate with contractors to ensure they are aware of the changes and fully aware of the decisions that are being made.
  • Implement a robust process to account for PAYE deductions on invoice payments to inside IR35 contractors.
  • Make ongoing critical assessments of new contractors, to check their awareness of IR35 and your decisions.


Our extensive IR35 knowledge means we’re also well placed to support contractors with these off-payroll working services:

  • HMRC enquiries into your IR35 status for any years prior to 6th April 2021 when it was the PSC’s responsibility to report correctly.
  • Independent IR35 determination reviews to help support your position or any challenge against a status determination you have been issued.
  • Providing contractor or PAYE net pay comparison calculations to help you assess your position and provide the best route for you and your company.
  • Advice on the future position of individual PSCs and assistance with voluntary liquidation where appropriate.

Where the latest IR35 rules mean you move from a contractor relationship to an employee relationship, that leaves your PSC as a potentially unnecessary entity that needs to have its affairs wound up.

This deserves careful consideration, as how the PSC is closed can have significant tax implications for its shareholders. Our experience in dealing with these circumstances means we can ensure the whole closedown is carefully controlled from start to finish, using the most cost-efficient and tax-efficient processes.

  • I have come to rely on AAB to guide me with the production of the annual accounts and with the application of our accounting policies. It is comforting to have AAB's help and guidance.

    Bob Hutcheson, UCAN

  • I contemplated transferring my business to a limited company and I knew I could rely on AAB to make the process as straightforward as possible whilst providing the accounts and tax advice to enable me to make the right decision.

    Colin Brown

  • AAB helped to build the Workflow Max application around our business needs ensuring that it met the very specific project requirements. From implementation to the present day, AAB have provided all the support and training we need.

    Mark Burntonwood, Director

#Updates See all updates

Sign up to updates

  1. Blog26th Sep 2023

    Seamus McElvanna, Senior Private Client Manager at FPM who wrote blog about income tax enquires

    Would you be ready if HMRC lodged a formal enquiry into your Income Tax Return? 

    A tax enquiry is the process by which HMRC check in detail that the information on a tax return is correct and complete. HMRC have the right to make a formal enquiry into every tax return submitted to them. This…

    By Seamus McElvanna

    View more
  2. Blog21st Sep 2023

    Alan Campbell, author of blog can employee ownership trusts provide an alternative to succession

    Can Employee Ownership Trusts (“EOTs”) provide an alternative to family succession?

    Known for their adaptable nature, innovative spirit and contribution to the economy, the importance of the successful continuation of our family businesses cannot be overstated. Retaining the ownership and running of the business within the family is often considered a…

    By Alan Campbell

    View more
  3. Blog20th Sep 2023

    Photo of a man wearing a white shirt - Ian Bremner, AAB Hotel Accounting partner

    Nine benefits of hotel accounting

    Many hotel operators can be reluctant to enter a discussion about hotel specific accounting software. There is a common misconception that it is expensive, and that the owner or management company won’t have full control of their data. In today’s…

    By Ian Bremner

    View more
  4. Blog18th Sep 2023

    Claire Smith, Restructuring & Recovery Manager who wrote a blog about members voluntary liquidation

    What Does Members Voluntary Liquidation mean?

    It can be a daunting time for business owners closing down a solvent business. Owners are used to having full control and dealing with all business matters, therefore understandably, we are asked many questions before and during the process of…

    By Claire Smith 

    View more

See all updates

Our accreditations