From Tuesday 6 April 2021, organisations that engage “off-payroll” workers via an intermediary will become responsible for determining their employment status and paying Income Tax and NICs for those who are deemed to be employees. 

Before this date, the responsibility to decide on the freelancer’s employment status rested with the intermediary.

By intermediary we mean where freelance Personal Trainers or instructors have set themselves up as a limited company e.g. Joe Bloggs operates through Joe Blogg’s Limited or are supplied via an employment agency/business.

This change may sound familiar – it had been due to take place last April, but because of COVID-19, it was pushed back a year.

 

What is IR35

IR35 is a reference to tax legislation, which applies where individuals provide their services to an organisation through an intermediary company where, if it wasn’t for that company in the middle, the individual would be regarded as an employee for national insurance and tax purposes. 

The effect of IR35 is to collect the same amount of income tax and national insurance contributions as would have been paid if an individual had been employed directly by the client.

 

What it means for health club and leisure centre operators working with freelance Personal Trainers and instructors?

Many Personal Trainers (PTs) across the UK operate in health clubs and leisure centres as “off-payroll” gym or class instructors (via their own limited company) in lieu of paying floor rent to operate their business. They are often required to carry out activities such as inductions, classes and even cleaning, which are dictated by their managers and organisations.

These Personal Trainers typically;

  • Have to ask for time off
  • Have to ‘make up’ any uncompleted ‘gym floor’ hours 
  • Work their PT business around a shift rota and appointments set up and made by the club and not the PT working hours 
  • Have the service they deliver for the club (cleaning, inductions, classes) dictated to them (when, where and how it will be delivered)

All the above tend to be indicative of someone HMRC (and an Employment Tribunal) might deem a “worker” or “employee” if challenged, leaving the organisation exposed to the risk of becoming responsible for deducting and passing on Income Tax and NICs to HMRC, as well managing the increased costs and responsibilities attached to the various employment/worker rights the individual may be entitled to. 

So the financial impact of these IR35 changes can be significant, reducing a Personal Trainer’s net income by up to 25%, amounting to thousands of pounds in additional income tax and NICs.

Find out more about what IR35 means for health club and leisure centre operators working with freelance Personal Trainers and instructors by viewing the IR35 White paper.