Off-Payroll Changes - May 7th 2025

Medium-sized companies becoming small, as a result of changes in the monetary size thresholds for micro, small and medium-sized enterprises from 6 April 2025, will have to wait two or three years before they are relieved of the burden of reporting under the off-payroll working rules.

From 6 April 2025, a company qualifies as small if it satisfies at least two of the following criteria:

• turnover not more than £15 million (previously £10.2m);
• balance sheet total not more than £7.5m (previously £5.1m);
• not more than 50 employees (no change).

The off-payroll working rules apply to workers who provide their services to a client through a personal service company. If the client is a small company outside the public sector, the worker’s own company is responsible for deciding employment status. Otherwise the client must do so.

Consistency required

Where a company that has been medium newly meets the qualifying conditions for being small, it will qualify as small for business reporting purposes only if it meets the conditions in two consecutive financial years. Under a transitional provision a company will be treated as having qualified as a small company in any previous year in which it would have done so under the new criteria.

Delayed qualification

However, for the purposes of off-payroll working a company’s size is determined by reference to its previous financial year end and is then set for the duration of a tax year. The effect is that the earliest a previously medium-sized company can qualify as small for off-payroll working is 6 April 2027 in most cases.

So companies that were large or medium until 5 April 2025 must continue to ensure they comply with the off-payroll working rules for medium and large companies until they are no longer considered medium or large. No transitional arrangements have been provided

Please contact us if you need assistance in complying with the rules.