Prepare for off-payroll working

If you provide your personal services through your own company, the way you are taxed may change for contracts performed for large organisations from 6 April 2021, due to the off-payroll working rules.

Where your final customer is not small, it must determine whether the relationship with you is a deemed employment. It may do this using the HMRC online tool called “CEST” (Check Employment Status for Tax). Your customer may ask you to provide information to feed into the CEST tool before April 2021, to help it form its determination.

Your customer (or the agency you deal with) should tell you the outcome of the employment status determination and you can object if you disagree with the result.

Where your work is treated as a deemed employment, the payments made to your company for that work must have income tax and employee’s NIC deducted from the gross amount. Additionally, the client will have to pay employers’ NIC, which may impact on the fees that they are willing to agree with you for work.

VAT is charged on the gross invoiced amount as normal, if your company is VAT-registered.
Where your relationship with your customer is not deemed employment, your invoices should be paid with no deductions, as now.

A quick way to determine whether your customer is “small”, and not affected by the off-payroll rules, is to check whether its last accounts have been audited. Small companies are not audited, and small is also defined as not meeting two or more of these criteria:
• Annual turnover: more than £10.2m
• Balance sheet total: more than £5.1m
• Average number of employees: more than 50

The last set of accounts filed at Companies House will tell you if the company has been audited and should give you the figures to check against the above criteria.

We can help you check your customer’s accounts and advise on how to tell whether that organisation may have to apply the off-payroll rules to your contracts.