The new private sector IR35 rules enacted by Finance Act 2020 introduced a wider definition of intermediary, where that intermediary is a company, than had previously applied for IR35 purposes. This had not been intended and would have meant, for example, that an umbrella company would have been considered an ‘intermediary’ and caught by the new rules even if it applied PAYE and NIC in full to the payments it made to the Personal Services Company in respect of the services supplied to the client.
Legislation will be introduced in Finance Bill 2021 amending the legislation to narrow the definition. This will ensure that the wider definition of an intermediary that is a company will only apply if the income has not all been treated as employment income.
In addition, there will be a few other changes to the legislation:
Those businesses engaging with intermediaries for the provision of services and the intermediaries themselves will be affected by these amendments.
The new rules and these amendments will take effect from 6 April 2021.
We welcome this clarification and amendment to the legislation to ensure that there are no unintended consequences resulting from the wider definition of intermediary. The measure extending the requirement for either the intermediary or the worker to notify the potential deemed employer is likely to improve the flow of information and the operation of the law in practice.