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New Off-Payroll Rules

As from 6th April 2021, Off-Payroll rules will apply to the private sector where a contractor provides their services through an intermediary, unless the end-client is a small company (as defined by the Companies Act 2006). The client must perform and provide an employment status determination to ascertain whether the contract falls within or outside the scope of IR35. If no status determination is performed by the client then the ‘’Fee Payer’’ in the contractual chain and based in the UK is responsible for making the determination.

IR35 Implications

Contracts determined outside of the scope of IR35 may be paid gross. In all other cases, payments must be subject to tax and social costs (NICs).

Umbrella Solution

Other Deductions 44%
Management Fee 5%
Retained Income 51%

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Open to all nationals (who hold the right to work in the UK) and those who seek the security of continuous employment. This solution may appeal to non-EU citizens, contractors who fall inside IR35, or British nationals returning to the UK from working abroad (post-Brexit). An employed individual will retain approximately 51% of their emoluments, depending on their circumstances.

Limited Company / PSC Solution

Other Deductions 28%
Fixed Costs 2%
Retained Income 70%

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For the more experienced contractor, where there is a degree of independence between the contractor and the client (i.e. where there are no IR35 concerns), then using a limited company is an attractive option. This solution is for UK nationals and those having the right to work in the UK. An individual working through their own PSC may enjoy a retention of approximately 70%.