Off-Payroll Working from April 2021 – HMRC clarifies who is and isn’t caught by the new rules

Off-Payroll Working from April 2021

More corporate intermediaries could fall within ’IR35’ from April 2021. However, HMRC has recently clarified its position – what does this mean for you?

Colin Ben-Nathan


KPMG in the UK


Currently, a worker who provides services through a corporate intermediary must, broadly, hold more than 5 percent of its ordinary share capital or ownership rights to be within the scope of ‘IR35’.

This will change from 6 April 2021.

On and after that date, ‘IR35’ can also apply to an engagement where the employee does not hold a material interest, but receives, or has the right to receive, a ‘chain payment’ (effectively a payment in return for the services performed by the worker) from the intermediary.

This prospective change is to prevent workers avoiding the off-payroll working rules by ensuring that, collectively, they hold a 5 percent or less interest in the intermediary.

However, KPMG and others have raised concerns that this change could also unintentionally impact umbrella companies, agencies and other organisations that provide staff to end clients. In particular, that from April 2021 the end client could be required to apply the off-payroll working rules in these situations due to the worker receiving a ‘chain payment’. This is even though all amounts would have been paid to the worker subject to PAYE in any event.

HMRC’s approach

HMRC has confirmed this is not the policy intention, and announced that:

’Where a worker is already subject to PAYE on all of the income from an engagement as an employee, other than with their own intermediary, HMRC does not intend [the off-payroll working rules] to apply.’

HMRC is engaging with stakeholders on this issue and considering what action is required to ensure the off-payroll working rules are applied as intended.

What should organisations do?

Businesses which use off-payroll workers should confirm which engagements will in principle be brought within the scope of ‘IR35’ from April 2021 as a result of this change, and analyse which should:

  • Remain outside ‘IR35’ by virtue of HMRC’s recently announced approach (and document their conclusions); or
  • Be considered in more detail by virtue of the worker being in receipt of a ‘chain payment’.

Communication with umbrella companies, agencies and other organisations providing labour will also be important, particularly where off-payroll workers are currently outside the scope of the off-payroll working rules because they do not hold a ‘material interest’ in their corporate intermediary.

How can KPMG help?

We have extensive experience of assisting organisations prepare for the new ‘IR35’ regime and have developed a suite of technology solutions that include:

  • A tool to identify workers and confirm the existence of personal service companies with Companies House
  • An employment status assessment tool tailored to the role profiles that exist in the organisation
  • A workflow tool to share information, provide status determination statements and resolve disputes (which also captures and stores relevant information for presentation to HMRC in the event of a review).

If you would like to talk through how KPMG can help your organisation prepare for the new off-payroll working regime, please get in touch with your normal KPMG contact, or e-mail Matthew Hunnybun, Caroline Laffey, Colin Ben-Nathan, Anne-Marie Robinson, or

© 2022 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit

Connect with us

Stay up to date with what matters to you

Gain access to personalized content based on your interests by signing up today