IR35 and off-payroll - is it the same thing?

IR35 is a term used to describe two pieces of legislation designed to generate more tax from workers who provide services to their customers via limited companies.

The Intermediaries legislation was introduced in April 2000, designed to generate more tax from workers delivering services through a limited company.

Off-payroll is the new and separate 2017 public sector legislation, which was expanded in 2021 to include medium and large companies in the private sector.

Both sets of legislation were introduced because the tax authorities believed the nature of the engagements was more akin to employment and that more tax should be paid.

The IR35 rules seek to redefine the tax status of an individual providing their services so that payments made to them are treated as "employed for tax purposes."

Under the Intermediaries legislation, the contractor is responsible for assessing the status and is liable for any taxes. The Intermediaries' legislation should be considered if the worker works for an overseas client or a small UK company where the engagement is "inside IR35". The intermediary must pay two sets of National Insurance contributions and income tax where this occurs as if the PSC is treated as employing the individual.

Off-payroll applies where the engagement is for a medium or large client and is "inside IR35". Where this occurs, the client must pay the two sets of National Insurance contributions and income tax, as if the client is treated as employing the individual. Under the off-payroll rules, the client is responsible for assessing the status and is liable for any taxes.

The off-payroll rules shifted the responsibility for determining the tax status and tax liability from individuals working through PSCs to the client.