What is a small or medium-sized company?

The Companies Act 2006 categorises companies as “small”, “medium”, or “large”. If a business is classified as “medium” or “large”, it must comply with off-payroll legislation and IR35 reforms.

The three parameters are in Section 382(3):
https://www.legislation.gov.uk/ukpga/2006/46/section/382

A company is classified as small if it meets two of the following criteria:

1. Turnover not more than £10.2 million
2. Balance sheet total not more than 5.1 million
3. Number of employees not more than 50

It is essential to know when your company technically becomes affected by the IR35 legislation.

From an off-payroll perspective, when a company moves from being small to medium or large, this doesn't mean that the new rules may apply overnight. There are timing provisions in place that give the company time to adjust its processes.

The off-payroll legislation applies to medium and large companies in the UK, so it is crucial to establish the size of your business and check whether the rules apply.