Are you ready for the new off-payroll working rules?

The new off-payroll working rules could significantly change the way contractors, consultants and self-employed solicitors are taxed from next month, the Law Society for England and Wales has warned.

The report comes ahead of the introduction of the new legislation, known as IR35, on 06 April 2021.

Under the new rules, large employers and public authorities will become responsible for determining the employment status of a worker and how they should be taxed.

According to HM Revenue & Customs (HMRC), the new rules will ensure that solicitors who are working like employees but are paid through their own limited company – such as a Personal Service Company (PSC) – pay “broadly the same Income Tax and National Insurance contributions (NICs) as individuals who are directly employed”.

Warning solicitors, the Law Society said employers and contractors should urgently consider the “potential impact” of the new off-payroll working rules.

“The off-payroll working rules are intended to achieve essentially the same income tax and national insurance contribution consequences for individuals who work like employees but through intermediaries,” said the regulator.

“All public sector authorities and medium and large-sized private sector clients will be responsible for deciding if the rules apply.

“However, if a worker provides services to a small client in the private sector then the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply.”

According to official statistics, around 170,000 self-employed workers could pay more tax under the new off-payroll rules after they come into force in April.

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