Off-payroll working rules increased to the small company threshold

The off-payroll working rules (also known as IR35 legislation) ensure that a worker who provides their services through their own intermediary (usually a personal services company) broadly pays the same Income Tax and National Insurance as an individual who would otherwise be directly employed by the client.

Where the client or ultimate end-user is considered under the Companies Act 2006 (CA 2006) to be a “medium” or “large” business, it is this entity who will be responsible for determining the employment status of the worker and, where necessary, pay the relevant Income Tax and National Insurance Contributions. This is in contrast to where the client is considered “small” under the CA 2006; in this case it is the worker’s intermediary who is responsible for assessing the worker’s employment status and tax position.

As noted above, the position under IR35 legislation is contingent on whether or not a business is considered “small” pursuant to the CA 2006. The size of the business is assessed by reference to certain criteria as set out in the CA 2006, with these thresholds set to change. HMRC has confirmed that these new regulations will also apply to the off-payroll working rules.

Therefore, from 6 April 2025, a private company will be considered “small” if any two of the following conditions are met:

• turnover of not more than £15m (increased from £10.2m);
• balance sheet total of not more than £7.5m (increased from £5.1m); and
• not more than 50 employees (no change).