The off-payroll working rules, commonly known as IR35, are a piece of legislation brought into place to ensure that contractors working like employees via their Personal Service Company (PSC) pay similar levels of tax and national insurance to those who are employed directly. 

If an engagement between a contractor and their client is considered to fall within these rules (known as ‘deemed employment’), then the contractor is required to be treated as an employee for tax purposes only.

Understanding off-payroll working (IR35)

This guide explains how to enable the off payroll working checkbox for an employee in Clear Books Payroll. This will allow you to flag the employee as an off payroll worker in your full payment submissions (FPS) to HMRC.

Navigate to the Employees > View menu.

Either add a new employee or click on the name of an existing employee to edit their details.

If you are adding a new employee make sure to update all the required details in each tab of the employee form.

For the off payroll worker option, click on the ‘Employment details’ tab and tick the ‘Off payroll worker’ checkbox. 

Save the employee.

 There are a number of additional things to note if the employee has the off payroll worker option enabled:

  • An ‘off payroll worker’ flag is submitted on full payment submission (FPS). This will inform HMRC of any employees considered to be off payroll workers.
  • Statutory payments are disabled for off payroll workers.
  • Pension calculations are disabled for off payroll workers.
  • Employment allowance is not used against off payroll workers.