Clear Books is proud to provide small businesses with a simple payroll solution that links directly to Clear Books accounting software to support efficient bookkeeping processes. Recently, we’ve made changes to our payroll to help customers affected by the new off-payroll working rules which come into play as of 6th April 2021. 

What are the off-payroll working rules?

The off-payroll working rules, commonly known as IR35, are a piece of legislation brought into place to ensure that contractors working like employees via their Personal Service Company (PSC) pay similar levels of tax and national insurance to those who are employed directly. If an engagement between a contractor and their client is considered to fall within these rules (known as ‘deemed employment’), then the contractor is required to be treated as an employee for tax purposes only. IR35 doesn’t bring in any changes to the treatment under employment law, employee benefits, or contractual matters, for example.

What’s changing? 

Before the change, if a contractor provides services to a public sector client, the client is responsible for determining whether that engagement falls within the IR35. As of 6 April 2021, HMRC will widen the scope of these rules beyond public sector clients, to also include clients that are medium or large businesses. If the client determines that their engagement with a contractor falls within the IR35, then they (or the deemed employer if this is different to the client) are responsible for deducting tax and national insurance contributions. 

Clear Books’ payroll supports businesses affected by the IR35

Clear Books has added a new checkbox to the ‘Employment Details’ section of the form used to add/edit an employee, to denote them as being within the scope of off-payroll working. This will allow businesses paying contractors via PAYE to mark them as employees for tax purposes only. When this checkbox is selected the system will make the following adjustments:

  • Flag employee as an off-payroll worker to HMRC on the FPS submission
  • Disable any statutory payments for the employee
  • Disable any pension calculations for the employee
  • Employment allowance will not be used against the employee

If your business will be running payroll for contractors caught by the new off-payroll working rules, you can rest assured that your payroll will be compliant using Clear Books payroll. 

We’re here to help

Our friendly UK based support team is also on hand to help with any questions you may have. You can reach them on 0203 475 4744 or you can contact them here

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Posted by Chloe Morris

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