What IR35 insurance specialist Qdos calls the ‘devil in the detail’ has emerged for the redrawing of the boundaries of the off-payroll working rules, with now-in-force changes to company size thresholds meaning many businesses will not be relieved of their obligations until the 2027/28 tax year at the earliest.

From April 2025, two of the three thresholds in the Companies Act increased, applying to company financial years starting on or after this date. These increased thresholds mean that a business is considered medium if it has a turnover of more than £15m and a balance sheet total of more than £7.5m. The 50-employee limit remains the same.

As a result, 14,000 businesses are expected to reclassify as ‘small’ – “the knock-on effect”, Qdos said, “is that they will no longer be required to manage the off-payroll working rules, in turn, meaning the contractors they engage will start to determine their own IR35 status once again”.

The changes to the Companies Act are now in force, with an 8 April update to the government’s employment status manual revealing the full details.

Due to the off-payroll working rules using fully completed financial years to establish size – with any change only applying in the subsequent tax year – any change in corporate size will take at least 19 months to be reflected in off-payroll responsibilities, Qdos said.

The changes only relate to the conditions used to determine a client’s size. In its update, the government said: “The relevant financial year for OPW purposes remains the last financial year for which the period for filing its accounts ended before the beginning of the tax year, and a company still needs to meet the relevant conditions to be considered small or medium-sized for two consecutive financial years.”

Qdos CEO Seb Maley commented: “The off-payroll boundaries are to be redrawn and around 14,000 businesses are to be relieved from their off-payroll obligations. By all accounts, it’s a step in the right direction and will be warmly welcomed by businesses themselves and the contractors they engage.

“But the small print has confirmed that this is by no means something that will happen overnight. In fact, many businesses will need to wait until April 2028 at the earliest to start benefitting from the adjustments – the same goes for contractors who are engaged by them.

“For these firms, it means at least another two years of managing the off-payroll rules, even if the business is now classed as ‘small’ under the Companies Act.” Maley added that while this might frustrate businesses, it was “vital” that those which are affected continue to prioritise their compliance within what might feel like a transitional period.

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