The taxation of off-payroll workers: the legislative waterfall

The changes to the off-payroll working rules (known as IR35) in Chapter 10 of ITEPA 2003 Part 2 introduced in April 2021 resulted in many businesses reviewing their labour supply chains and specifically how they engaged temporary workers. To avoid managing the significant compliance and tax requirements imposed by IR35 many businesses sought to alter their labour supply engagement models. Some businesses introduced bans on engaging contractors through personal service companies (PSCs) whilst others sought to route all off-payroll workers through third party suppliers such as employment agencies and umbrella companies.

Having implemented alternative engagement models those businesses need to consider the application of various tax rules that may be relevant to off-payroll workers even where IR35 does not apply – either because the worker has been...