Some Good News for PR Freelancers on IR35

The UK’s off-payroll working rules, commonly known as IR35, have been a significant consideration for PR freelancers and the companies that engage them. Recent developments indicate forthcoming changes that could positively impact freelancers and employers.

Understanding Off-Payroll Working Rules

Introduced to ensure that individuals working like employees but through intermediaries pay similar taxes to regular employees, the off-payroll working rules have evolved over time.

Since April 2021, medium and large-sized private sector clients have been responsible for deciding the employment status of workers engaged through intermediaries. This shift aimed to enhance tax compliance but also introduced complexities and costs for businesses and freelancers alike.

Upcoming Changes to Company Size Thresholds

The rules only affected larger employers hiring freelancers and effective from 1 April 2025, the financial thresholds defining company sizes will increase.

A private company will be classified as small if it meets at least two of the following criteria:

• Turnover of not more than £15 million (up from £10.2 million).
• Balance sheet total of not more than £7.5 million (up from £5.1 million).
• An average of 50 or fewer employees.

For off-payroll working purposes, a company’s size is determined based on its previous financial year. Therefore, these changes will practically impact off-payroll working from 1 April 2026 onwards.

Implications for PR Freelancers and Hiring Companies

The increase in size thresholds means that more companies will fall under the ‘small’ category, exempting them from the responsibility of determining the employment status of freelancers. Instead, this responsibility will revert to the freelancers themselves. For PR freelancers, this shift can lead to greater autonomy and reduced administrative burdens, as they will have more control over their tax affairs.

Companies hiring PR freelancers will also benefit. Being classified as small alleviates them from the complexities associated with assessing the employment status of freelancers and managing related tax obligations. This reduction in administrative tasks can make engaging freelancers more straightforward and cost-effective.

Broader Context and Considerations

While these changes are promising, it’s essential to consider them within the broader landscape of employment legislation. The Employment Rights Bill, introduced in October 2024, proposes various reforms aimed at enhancing job security and improving working conditions. These include removing the two-year qualifying period for protection from unfair dismissal and introducing day-one rights to parental leave.

Such reforms could influence the dynamics between freelancers and hiring companies, making it more attractive to hire freelancers for long term contracts than a permanent member of staff.

Returning to IR35 and PR Freelancers, we have always argued that the HMRC tests known as CEST are both vague and include tests which are completely irrelevant to the work done by PR freelancers. For example amongst the questions asked in the test are:

“Will you have to buy equipment before your client pays you?” and “Will you have to fund any vehicle costs before your client pays you?”

This vagueness ahs led employers to deem freelancers inside IR35 out of a lack of clarity and a sense of over caution, even though it is not the interest of either party.

We worked with the CIPR and their lawyers to draft a form of PR contract which made it easier for employers and freelancers to agree terms which avoided these vague areas and enabled employers to be more confident in deeming that a freelancer could be hire outside IR35.

The contract is available to any member of the CIPR

Conclusion

The forthcoming changes to off-payroll working legislation, particularly the increased size thresholds, present favourable prospects for PR freelancers and the companies that engage them.

Freelancers can anticipate greater control over their tax affairs, while companies may benefit from simplified processes when hiring freelance talent. As these changes approach, it’s crucial for both freelancers and businesses to stay informed and adapt accordingly to maximize the potential benefits.