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Who does the new Off-Payroll rule apply to and who is exempt?

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The reforms will only apply where the client is a medium or large business, or a public body, which means there is an exception for clients who are small businesses. The Government has chosen to use the definition of 'small company' in the Companies Act 2006, mainly because businesses and accountancy professionals should already be familiar with this definition and to what extent it applies to them. The Government has stated that it intends to use ‘similar criteria’ as found in the Companies Act 2006 to define a small business.

The Act says that a company will be regarded as small if it has two or more of the following features:

  • Turnover: Not more than £10.2m (previously £6.5m)
  • Balance Sheet Total: Not more than £5.1m (previously £3.26m)
  • Average Number of Employees: Not more than 50 (no change) Both tests would be measured on an annual basis in the same way as the Companies Act test.

When an organisation becomes, or ceases to be small in an accounting period, for the purposes of the off-payroll rules, that change will apply from the start of the tax year following the end of that accounting period regardless of whether they are incorporated or not.

Current Rules vs. New Off-Payroll Working

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