What is the Off-Payroll Tax?
IR35 and the Off-Payroll legislation are two separate items of tax legislation aimed at countering perceived tax avoidance, specifically targeting limited company contractors and the firms that hire them.
For a contractor, being found ‘inside IR35’ could mean a reduction of tens of thousands of pounds of contracting income per year, without receiving the requisite employment rights that their deemed employment status would warrant. Under the Off-Payroll legislation, firms that engage contractors deemed to be within scope of the rules will also have to fund additional employment taxes, on top of the fees paid for hiring contingent workers.
Off-payroll rules - the facts:
- IR35 and Off-Payroll targets "deemed employment" relationships.
- HMRC is mainly targeting perceived loss of employer’s NICs, which firms do not pay if they hire contractors.
- Off-Payroll requires medium and large hiring firms to assess the 'IR35 status' of contractors.
- Hirers are required to take ‘reasonable care’ and assess contractors individually.
- Agencies engaging with ‘inside IR35’ contractors assume responsibility for calculating and paying taxes.
If you are a genuine professional contractor, freelancer, interim or consultant who is in business on your own account, you should have nothing to fear from IR35 or Off-Payroll. This is so long as you take the time to understand how the legislation works and work with clients who are prepared to treat you fairly.
You can start by using our Off-Payroll calculator to understand how much extra tax each party has to pay if the status is 'inside IR35'.
Off-payroll Tax Calculator - calculate the cost of being caught
Please enter your details to calculate the impact of Off-Payroll on you and your hirer:
NOTE: The tax calculations under the IR35 legislation are different, and are higher for the contractor. Please use our IR35 Calculator if you wish to calculate your tax under the original legislation.
Find out your IR35 status in 15 minutes
Use our simple online assessment to analyse and check whether you fall inside HMRC’s rules. This assessment, developed by experts, will cover all potential risk areas and help evaluate your status.
TAKE THE IR35 ASSESSMENT NOWOur top Off-payroll and IR35 Guides
Off-Payroll Calculator
Find out how much extra tax you will need to pay if you are caught.
What is the Off-Payroll tax?
Learn the basics of the new legislation and if it affects you.
10 reasons your contract will fail IR35
Make sure you have everything covered to protect yourself
What is an IR35 Status Determination Statement (SDS)?
Clients must provide an SDS when assessing contractor status.
All of our Off-Payroll and IR35 guides
What is Off-Payroll?
What is the new Off-Payroll (IR35) tax?
Find out what the Off-Payroll tax is, how it affects you, and what you can do to prepare for the changes with this comprehensive guide.
Contractors encouraged to weigh up risk and reward of ‘outside IR35’ indemnities
Indemnities could help contractors secure ‘outside IR35’ contracts, providing they take care to ensure Off-Payroll compliance and mitigate their risk.
Off-payroll audit guides
Off-Payroll audit guide: A timeline for agencies and hirers to achieve compliance
The Off-Payroll rules may not be implemented until April 2021, but hiring firms and recruitment agencies need to begin preparations now. Find out why.
Off-Payroll audit guide: Understanding contractor operating structures
An understanding of contractor operating structures is essential for achieving Off-Payroll compliance and avoiding unnecessary administration.
Off-Payroll audit guide: How to identify and address IR35 risk before April 2021
An early evaluation of your contingent workforce is needed to help identify and address common IR35 risk factors in advance of April 2021.
Off-Payroll audit guide: How to avoid IR35 compliance risks in the supply chain
Hiring firms and recruiters must take careful measures to negate tax liability risk resulting from the Off-Payroll (IR35) debt transfer provisions.
Off-Payroll audit guide: How to calculate and budget for the real cost of Off-Payroll
The financial impact of the Off-Payroll rules stretches far beyond employment tax liability. Find out how to calculate, and mitigate, the true cost.
Off-Payroll audit guide: How to use assessments to identify working practice pitfalls
Find out how contractor clients can harness IR35 assessments to mitigate IR35 risk by identifying and addressing common working practice pitfalls.
Off-Payroll audit guide: How to engage contractors after April 2021
The Off-Payroll rules impose a host of factors for clients to consider when selecting a contractor engagement model. Find out the best option for you.
Off-Payroll audit guide: Why client and agency cooperation is key to compliance
Clients and recruitment partners need to work together to achieve compliance and avoid the financial and criminal risks posed by Off-Payroll.
Off-Payroll audit guide: How to manage your contractor workforce
How contractor clients manage their contingent workforce will have a crucial bearing on company performance in the wake of the Off-Payroll rules.
Off-Payroll audit guide: How to accurately assess status without IR35 expertise
The Off-Payroll rules require accurate IR35 assessments demonstrating ‘reasonable care’. Find out how to achieve this without becoming an IR35 expert.
Off-Payroll audit guide: How to avoid compliance complacency
Off-Payroll compliance doesn’t end with the contractor’s status determination. Find out how to avoid the potential pain of compliance complacency.
Off-Payroll audit guide: How to create an effective and accurate compliance strategy
Off-Payroll compliance is perfectly manageable when clients and their recruitment partners have an effective and accurate compliance strategy.
How HR advisors can help clients with Off-Payroll IR35 rules – 7 simple steps
HR advisors will be vital in ensuring their clients navigate successfully the risks posed by the Off-Payroll IR35 rules. Find out how to do so, here.
IR35 and umbrella companies
Contractors assessed ‘inside IR35’ could claim rights under AWR, says lawyer
Contractors subject to blanket ‘inside IR35’ assessments have a strong case for rights under the Agency Workers Regulations, says Martyn Valentine.
Limited company ‘inside IR35’ v umbrella PAYE – advantages and disadvantages
Contractors working ‘inside IR35’ following the implementation of the Off-Payroll legislation need to consider their preferred operating model.
Off-Payroll rules: Beware the disguised remuneration operators
Professional Passport CEO Crawford Temple explains how contractors can identify and protect themselves from disguised remuneration schemes.
IR35 status and assessments
What is an IR35 Status Determination Statement (SDS)?
Learn what an IR35 Status Determination Statement is, why contractor clients will soon need to provide them, and why reasonable care is so important.
Role-based blanket IR35 assessments are unlawful and highly risky
IR35 blanket assessments based on assessing roles are unlawful and present huge risk, yet HMRC still encourages their adoption.
How to appeal wrongful tax treatment following an incorrect Off-Payroll assessment
Tax expert David Kirk explains the various options available to contractors seeking to reclaim tax that has been overpaid as a result of Off-Payroll.
What is IR35? Does it apply to your contract?
It is tax avoidance legislation designed to ensure workers using an intermediary but who are ‘disguised employees’ pay the correct amount of tax.
Can ‘inside IR35’ contractors claim full employment rights at tribunal?
Contractors deemed ‘inside IR35’ under the Off-Payroll legislation could succeed with an employment rights claim, says tax barrister Alexander Wilson.
CEST-gate and DWP’s £87m – to win, don't play the game
IR35 Shield CEO Dave Chaplin analyses the latest episode of CEST-gate and explains why the only winning move is not to use CEST at all.
Off-payroll (IR35) – How to effectively hire using contracted-out services
All parties in the supply-chain should be careful to ensure that the consultancy really is a fully contracted outside service, otherwise they may find themselves subject to considerable future tax bills.
Agency Payroll under IR35
How in-house payroll solutions help agencies meet Off-Payroll obligations: part 1
Agencies responsible for taxing contractors under the Off-Payroll rules may find an in-house payroll to be the safest and most effective solution.
How in-house payroll solutions help agencies meet Off-Payroll obligations: part 2
Establishing a payroll using third party software can help agencies meet their Off-Payroll obligations while maximising operational efficiencies.
Five questions to ask agencies about ‘inside IR35’ contracts
Contractors considering working ‘inside IR35’ under Off-Payroll should ask questions of the agency to seek important clarifications.
How managed payroll services help agencies meet Off-Payroll obligations
Agencies required to run a payroll for contractors affected by the Off-Payroll rules could realise substantial benefits from outsourcing.