The government has confirmed that changes to off-payroll working rules will apply to the private sector from 6 April 2021, including charities and other not-for-profit organisations.
Small entities will be exempt from these rules, commonly referred to as IR35. For charitable companies in order to qualify for this exemption two of the following three thresholds must be met; annual turnover of £10.2 million or less, gross assets of £5.1 million or less and average employee numbers of not more than 50. Unincorporated charities or those incorporated under charity legislation will only need to meet the turnover limit. For charities note that donations and grant income can be excluded from the definition of turnover.
Those charities that are caught by the rules will need to reconsider any arrangements where workers are remunerated through the use of a personal service company rather than being paid directly, as it will now be the charity’s responsibility to determine the employment status of the worker, with implications for the operation of PAYE and National Insurance. Even where payment arrangements are unchanged there are administration and record keeping requirements to be aware of, with a need to undertake a status determination for every worker affected and provide them with a Status Determination Statement detailing your conclusion.