The thresholds that organisations must meet to fall under the new rules are an annual turnover of £10.2m or more, a balance sheet total of more than £5.1m and having over 50 employees. It has been announced that donation and grant income will not be counted as part of turnover.
However, the Charity Tax Group (CTG) has warned that charities need to be aware of the rule change and prepare now as it could still increase costs.
The IR35 rules are designed to ensure that an individual employed through an intermediary, which will often be a personal service company, is not a direct employee in all but name. This is so that the right amount of tax and National Insurance Contributions are paid and that such an arrangement is not being used just to reduce tax liabilities.
From April 2020, it will become the responsibility of the employer to deem whether an individual is eligible to use a personal service company or should be on the payroll as an employee. This applies to all companies, including charities, that meet two of three thresholds over two accounting periods.