Off-Payroll Workers

On the eleventh day of TAXmas, we advise to thee on IR35 rules for off-payroll workers...

In a faraway land, in the very North-East of England, there was a company named Red Nose Navigation Limited (RNN Ltd). A medium-sized logistics company that every year guided Santa’s sleigh on Christmas Eve so that he could deliver presents to every child in a single night.

Five years ago, RNN Ltd needed to recruit some extra pairs of hands to help set up their systems for ‘Project Present Drop’. They enlisted the help of Little Helpers Limited, a Personal Service Company owned by Elfis Presently, along with ten other separate off-payroll workers to work inhouse at their North-East office. Elfis and the other s-Elf employed workers were recruited on a temporary basis to help with the project and would account for tax and NI via their s-Elf assessment tax returns.

Most of the workers were only engaged for that single project, however, RNN Ltd were so impressed with Elfis Presently’s IT expertise, that they asked him to stay on in a more integrated role within the company.

Four Christmases later and RNN Ltd decide to take on a new Finance Director, Mary Christmas. As her first order of business, Mary decided to review the off-payroll workers that RNN Ltd engaged with. During her investigations she came across Elfis Presentley’s contract for service but noticed that she often saw him in the office making his morning coffee. Mary flagged this with her team and was surprised to discover Elfis’s employment status hadn’t been reviewed since he first engaged with the company. Mary decided to use HMRC’s Check Employment Status Tool (CEST) and the results determined that Elfis was caught by IR35, and therefore he should be considered an employee of RNN Ltd.

Mary knew she needed to act promptly to try and correct this error, so consulted with her employment tax adviser, Angel North. Mary heard that other employers who had made the same error had received a large tax bill as they had to pay all the outstanding tax for all parties. Angel explained that HMRC had allowed employers to offset the PAYE tax with any tax already paid by the worker and their intermediary. Additionally, HMRC have announced that employers who have open cases can request a postponement of the settlement until the changes take place.

Mary exclaimed “Well isn’t that an unexpected gift this Christmas!”

If you need any help with employment tax matters, either for the Christmas past, present or the future, please get in touch with us at

Learn more... Employment Taxes at UNW