IR35 liability and responsibility: off-payroll refresher for April 2021

As part one and part two of this series for ContractorUK explored, the draft IR35 legislation for April 2021 introduces many obstacles for contractors, agencies and end-client businesses, writes David Harmer, associate director of contractor solutions at Markel Tax.

While many of the protagonists in the contractual chain may understand their own rights and responsibilities under the incoming legislation, it is worth summarising them in this third and final instalment, now that the Status Determination Statement (part 1) and the Status Disagreement Process (part 2) have been demystified:

Who is responsible for assessing IR35 status from April 6th 2021?

  • Medium and large-sized end-client businesses engaging with a Personal Service Company (PSC);
  • PSCs engaged by ‘small companies’ (as defined by s.382 of the Companies Act) retain the decision-making responsibility and the tax liability;
  • PSCs engaged by an end-client based wholly overseas are also responsible for assessing the status and retain the tax liability.

Who is responsible for the liability?

With the exceptions outlined above, the liability rests with the ‘fee-payer’ -- defined as the entity responsible for paying the PSC, even though the decision not to deduct tax and NICs may have been made above this party in the contractual chain.

The fee-payer is:

  • The end-client where the end-client engages the PSC directly; i.e. there are no other intermediaries or agencies sitting in the contractual chain between the end-client and the PSC;
  • The end-client where it does not fulfil its responsibilities under the legislation and take ‘reasonable care’ in doing so. In those instances, HMRC will require the client to pay the tax, NICs and Apprenticeship Levy due, even if another party has already made deductions in line with the original determination.
  • The agency closest to the PSC will typically be the fee-payer and is liable even though the decision has been made by the end-client (as long as the end-client has fulfilled its responsibilities under the legislation).


The SDS is a straightforward idea complicated by reality. But both the associated disagreement process and the SDS are fraught with pitfalls, especially for end-clients who have largely had less experience of dealing with IR35 than contractors. However, contractors too are likely to feel uneasy with their client deciding their fate. Our best-practice advice to end-clients, agencies and contractors alike is not to shy away from dealing with this legislation and to not put it off until the last-minute. 

Reach out

Seek specialist advice as soon as possible, but do your research thoroughly yourself, on anyone you are considering seeking advice from. Do they specialise in IR35 and self-employed status? Do they have a proven track record of not just reviewing contracts, but actively dealing with HMRC enquiries? And last but definitely not least, can they explain to you clearly what IR35 is, what your obligations are and how you can protect yourself? Hopefully, this three-part series has gone some way towards addressing this final, three-part question, and given contractors some answers of their own to head into preparations with.

Monday 10th Aug 2020
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Written by David Harmer

David began his career with Markel Tax at 18 and has since spent 10 years with the business, completing a law degree and working his way through the ranks of tax consultant to director. Defending tax payers against HMRC challenges on all areas of contentious tax law including IR35, self-employed status, CIS, agency legislation etc., his tribunal victories include the well-known Sherburn Aero Club case.
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