IR35 and off-payroll working: What businesses need to know

If your business hires contractors through intermediaries, like personal service companies (PSCs), you may be responsible for checking whether IR35 applies.

Who needs to comply?

Since April 2021, medium and large private companies must assess the employment status of contractors working via PSCs. If your business is classed as “small”, based on turnover, balance sheet total, and employee count, the responsibility still sits with the contractor.

What you need to do

If you’re required to assess IR35 status, you must:

• Review each contractor’s working arrangement.

• Consider factors like control, substitution rights, and financial risk.

• Issue a Status Determination Statement (SDS) explaining your decision.

• Share the SDS with the contractor and any agency in the supply chain.

Failing to issue an SDS means your business may be liable for tax and National Insurance deductions.

Key indicators of employment

To decide if IR35 applies, look at:

• Whether the contractor is obliged to accept work.

• Whether they can send a substitute.

• How much control your business has over their work.

• Whether they bear any financial risk.

If the contractor would be considered an employee without the PSC in place, IR35 likely applies.

Why it matters

Getting IR35 wrong can lead to unexpected tax bills, penalties, and reputational risk. It’s important to assess each case carefully and document your reasoning.

At BlueFox Accounting, we help businesses navigate IR35 with confidence. From assessing contracts to drafting SDS documents and managing payroll implications. Whether you’re a growing enterprise or a community organisation, we’ll make sure you stay compliant without losing sight of your values.