IR35 regulations focus on the taxation of workers who provide services through an intermediary, such as a Personal Service Company (PSC).
IR35 was first introduced into the public sector in April 2000 and was extended to the private sector in April 2021. These regulations also apply to individuals with ongoing contracts.
Purpose of IR35
IR35 aims to ensure that individuals who work like an employee, but through an intermediary (such as a PSC) are taxed similarly to regular employees. This includes deducting tax and National Insurance from their pay, which is managed through the payroll.
Who needs to comply
Companies must operate under IR35 regulations unless they meet at least two of the following criteria:
Have 50 workers or fewer
Have a balance sheet total of £5.1 million or less
Have an annual turnover of £10.2 million or less
If the company doesn't satisfy at least two of these criteria, it must comply with IR35 regulations.
Understanding the supply chain
IR35 regulations are centered around a "supply chain," where each party has specific responsibilities to determine the employment status of the worker and ensure compliance with tax obligations. For more information, please refer to our Help Centre article.