Large and medium-sized businesses need to be ready for IR35

Large and medium-sized businesses now just have a couple of months left to prepare for the changes to the off-payroll working rules (IR35).


From 6 April 2021, in most cases, the engager (employer) will be responsible for deciding whether to deduct tax and National Insurance Contribution (NICs) from freelancers and contractors, operating via a Personal Service Company (PSC), as if they were employees.


The new IR35 rules do not affect small businesses, as defined by the Companies Act 2006, where they meet two or more of these criteria:

- Annual turnover is no more than £10.2 million;

- A total of fixed and current assets (before deducting current liabilities, long-term liabilities and deferred tax provisions) over £5.1 million; or

- No more than 50 employees.

When a business grows from a small to a medium or large-sized business there is a two-year transition period before the IR35 regulations fully apply to that business.


Engagers are required to undertake this IR35 determination for every contract they agree with a worker. The official guidelines are as follows:

- Pass your determination and the reasons for the determination to the worker and the person or organisation you contract with

- Make sure you keep detailed records of your employment status determinations, including the reasons for the determination and fees paid

- Have processes in place to deal with any disagreements that arise from your determination.

The Government has created an assessment tool, CEST, which can be found here. This can be used to assess whether the engagement is classed as employment or self-employment and a report can be printed out as a record of your assessment if challenged by HMRC.


If the determination results in a contractor being within the IR35 rules, you will need to deduct and pay tax and National Insurance contributions to HM Revenue & Customs via PAYE.


Where an employer fails to correctly identify a disguised employment scheme, the worker’s tax and National Insurance Contributions (NICs) become their responsibility.


Where you hire a contractor via an agency it is the responsibility of the closest intermediary to the PSC to calculate, deduct and pay tax and NICs via PAYE on the contractor’s remuneration.


It is estimated that almost a quarter of the UK’s workforce now works on a contingent basis, either in the public or private sector, and so businesses must be prepared for the changes ahead.


Here are some basic steps that all businesses can take to help them prepare:


Conduct an audit of freelancers and contractors


As it will be the responsibility of the person engaging the services of a contractor to determine whether their work falls inside the new rules, you should carry out an audit of all employees and contractors currently working within your business to determine who may be affected.


Determine who falls under the rules


Last year, many businesses were considering a blanket approach to freelancers, but recent research suggests that more companies are taking a measured approach to ensure they aren’t disadvantaging contractors. You will need to determine whether each contractor falls “inside” or “outside” of the new rules.


This should be done on a case-by-case basis, as you could face serious repercussions for failing to demonstrate reasonable care to correctly classify such roles for employment tax purposes.


If the engager fails to correctly determine status, they will be held liable for any tax charges or NICs and could face a penalty from HMRC.


Communicate all changes 


Once you have determined whether a person falls within the rules or not you should communicate any changes to them. It is important to demonstrate that you are taking reasonable care to assess their status.


If you determine that a person should be within the new rules and you switch them to the PAYE system, as required, they could see their take-home pay reduced considerably. You should take the time to discuss these changes with them.


There is a disagreement procedure created by the Government to be used by the contractor and the organisation paying the fees if all parties do not agree with the determination.


Create an agreement policy


Businesses should prepare an agreement policy for any new contractors they take on from April 2021, which clearly outlines the contractor’s employment status.


Existing contractors might also need their agreements adjusted in light of the IR35 changes if they run into the new financial year.


Consider the costs


Many contractors have indicated that they intend to increase their daily or hourly rate to compensate for their income tax and NICs being deducted by employers.


You should discuss this with contractors as soon as possible so you can factor any additional costs into your employment budget.


If you rely on the services of contractors or freelancers it is important that you prepare your payroll systems and process for these changes.

Sequencing short-term finance effectively is vital for avoiding the interest trap

By Charlie Flockhart • September 9, 2026
For many businesses, short-term finance can provide an essential lifeline when cash flow becomes tight. Whether a business needs support covering a gap between paying suppliers and receiving customer payments, or managing seasonal demand, the right type of finance can keep a business moving during uncertain times. However, using short-term borrowing without a clear strategy can quickly become a slippery slope of missed payments and further injections of cash. Choosing the right type of finance for your business? Not all types of short-term finance are designed for the same purpose, so businesses need to choose the option that best matches their needs. An overdraft can provide a flexible cash buffer for day-to-day cash flow pressures, with interest usually charged only on the amount borrowed. Invoice finance can help unlock cash tied up in unpaid business invoices, while a short-term loan may be more suitable for funding a specific purchase or project. Problems can arise when businesses use one type of finance to solve an issue it was not intended to address. A short-term cash flow gap can turn into a long-term borrowing habit, causing interest costs and fees to build up over time and reduce profitability. How to avoid the interest trap? While short-term finance can be a valuable tool, it is important to understand the full cost of borrowing. Some forms of finance, such as certain credit cards, bridging loans and revolving credit facilities, can have higher interest rates and shorter repayment terms. Although these products can be useful in the right circumstances, they can place additional strain on businesses with unpredictable cash flow. Understanding the total cost of borrowing can help avoid unnecessary expense and ensure the finance remains affordable. Matching the right type of finance to the right business need can help businesses manage cash flow more effectively and avoid falling into an expensive cycle of debt. How can we help? Before you fall down the slippery slope of short-term finance, get in touch with an accountant. We understand that short-term finance can sometimes feel like the only option. Our team can help assess your cash flow needs, review your funding options and support you in choosing a solution that helps your business grow while keeping borrowing costs under control. For support with short-term finance options, get in touch with our team.

Inflation increases to a four-month high – How will businesses be impacted?

By Charlie Flockhart • September 9, 2026
The rate of inflation has hit 2.9 per cent in July 2026, up from 2.6 per cent in June, according to the latest data that has been published by the Office for National Statistics (ONS). This is the first rise in the national rate of inflation since March 2026, with the increase in the energy price cap being partly to blame. Businesses need to understand how this hike will affect them and what they must do to mitigate the issues. How is inflation affecting businesses? Higher inflation can increase the cost of running a business. Energy-intensive businesses and manufacturers are likely to feel the greatest impact, as rising energy prices can lead to higher production, transport and operating costs. Many businesses are already dealing with tight profit margins and may find it difficult to absorb these additional costs. Passing increased costs on to customers is not always straightforward, as consumers remain cautious about spending and may look for cheaper alternatives if prices rise too much. Inflation can also affect employment costs. Employees may expect higher pay to help maintain their spending power, creating additional pressure on business finances. With employment costs already rising, some organisations may take a more cautious approach to recruitment or delay planned investments. What should businesses do to mitigate the impact of inflation? With inflation remaining uncertain, businesses should review their budgets regularly and keep a close eye on cash flow. Understanding where costs are rising most quickly can help businesses identify areas where savings or efficiencies can be made. Businesses should also assess their pricing strategies to ensure they remain competitive while protecting profitability. Investing in technology, improving efficiency and carefully managing expenditure may help reduce the impact of rising costs. Strong financial planning and regular monitoring of business performance can help organisations remain resilient if inflation continues in the months ahead. How can we help? While the rate of inflation increasing to 2.9 per cent may not seem like a huge change, businesses must consider the impact that it will have on wider spending. Our team can help you manage your cash flow by completing financial forecasting to ensure that your business stays resilient should inflation rates increase further. For support with cash flow, get in touch with our team.

Gifting out of income – The overlooked way to reduce Inheritance Tax

By Charlie Flockhart • September 9, 2026
For many people, giving financial support to family members is an important part of their financial planning. Whether it is helping children with pension contributions or providing ongoing assistance, gifting can play an important role in Inheritance Tax (IHT) planning. The normal expenditure out of income exemption under Section 21 of the Inheritance Tax Act 1984 allows for gifts to be made without being chargeable for IHT purposes, if specific conditions are met. What are the requirements? Under Section 21, gifts can be exempt from IHT if they are part of a person's normal spending habits, are paid from their income and leave them with enough income to maintain their usual standard of living. This exemption only applies to gifts made from surplus net income, not from capital or savings. For example, withdrawals from an investment bond or the capital part of a purchased life annuity payment would not qualify. The donor must also be able to cover their normal living costs from their remaining income and cannot give away income and then use capital to make up any shortfall. Why is record-keeping important? As the exemption is usually claimed after death, it is important to keep clear records of any gifts made under the normal expenditure out of income rules. HMRC form IHT403 includes a schedule that can be used to record these gifts as they are made and can help support a future claim. To work out whether gifts need to be reported, the donor must add together any gifts made under this exemption and any chargeable lifetime transfers made during the previous seven years. If the total is more than the available nil rate band, all gifts must be reported to HMRC using form IHT100. HMRC will then review whether the exemption applies and confirm its decision in writing. If the total remains within the nil rate band, the exemption is usually reviewed only after the donor's death, when the executors can claim the exemption using forms IHT400 and IHT403. How can we help? Planning for IHT helps to safeguard your family's future, as utilising vital allowances enables you to minimise your IHT contributions. Our team of accountants can support you with gifting out of income so that you can provide for your family's future. Get in touch with our team for support with Inheritance Tax planning.