HMRC has issued guidance clarifying IR35 rules for intermediaries and contractors providing services to small clients.

IR35 rules, or off-payroll working rules, ensure that freelancers and contractors pay the same amount of income tax and National Insurance contributions (NICs) as a typical employee if they enjoy a working relationship with clients akin to employment.

The guidance confirms that if an agency worker provides services to a small client in the private or voluntary sector, the worker's intermediary is responsible for determining their employment status.

If IR35 rules apply, the worker will need to pay income tax and NICs, while the intermediary will have to pay employer NICs.

These rules differ from the relationship between intermediaries and medium and large-sized clients, the latter of whom are responsible for determining the employment status.

HMRC also clarified that intermediaries need to consider the IR35 rules for each individual engagement a worker enters into, who will have to report information on each engagement on their annual self-assessment return.

Further guidance on how to implement IR35 rules can be found on the Government website.

Talk to us about off-payroll working rules.