What are the key changes to IR35 legislation?

The UK government introduced new IR35 rules in the public sector in April 2017 and in the private sector from April 2021, which transferred the responsibility of determining whether the rules applied, along with the tax liability, from contractors to end-clients.

The key change in April 2021 was designed to target private sector organisations and ensure that where the worker was considered an employee if they were directly engaged, the earnings were taxed the same as employment income.

The new off-payroll rules mean that large and medium-sized businesses became responsible for assessing workers' tax status via intermediaries, such as limited companies or partnerships.

If a worker is deemed an employee under off-payroll, the client or "fee-payer" is responsible for paying the appropriate income tax and National Insurance contributions.

The new changes apply to all medium and large private sector businesses in the UK, but there is an exemption for small companies.