The Government has updated the eligibility thresholds for the definition of “small” companies in the private sector. This will impact those having to assess workers under the Off-payroll working rules – Intermediaries legislation (IR35).
From 6 April 2025, the government thresholds that determine if a company is classified as ‘small’ will increase when determining the turnover and balance sheet. This means that in line with the statutory definition within the Companies Act 2006 (Section 382), to determine if an organisation is classified as ‘small’ for accounting periods beginning on or after this date, a private company or organisation will now be considered small if two out of the three following conditions are met:
- turnover of not more than £15 million — increased from £10.2 million
- balance sheet total of not more than £7.5 million — increased from £5.1 million
- monthly average number of employees of not more than 50 — no change
The threshold changes will have no practical impact for Off-Payroll working until 6 April 2027 at the earliest, because a company’s size is determined by reference to previous years.
When an organisation becomes or ceases to be “small” in an accounting period, for the purposes of the “Off-Payroll” working rules that change will apply from the start of the tax year following the end of that accounting period.
The rules apply when:
- a worker provides their services through their own intermediary to a client - usually a personal service company
- a client receives services from a worker through their intermediary
- an agency or other supplier provides workers’ services to an end client and the worker is engaged through their intermediary
Generally, engagers in large or medium-sized organisations are responsible for determining the employment status of any worker supplying their services through an intermediary and must provide details of this in writing to all parties, the worker and or Agency if applicable.
Once provided, the party the client contracts with have a legal right to ask for the reasons for that determination and the client must provide those reasons in writing after receiving the request by the following deadlines:
- 31 days for the Public Sector
- 45 days for the Private Sector
Off-payroll working — student and postgraduate loan deductions
Employers are also reminded that if applying the off-payroll working rules you must not deduct student or postgraduate loan repayments from the payments that go through payroll.
These workers are responsible for making student or postgraduate loan repayments through their own Self-Assessment tax returns after the end of the tax year.
