As of April 2021, businesses in the private sector will become responsible for assessing the employment status for tax of people they hire on a contractor basis. This means businesses will be legally required to ensure their contractors, operating through personal service companies (PSC) pay the correct taxes, or risk penalties and being liable for any unpaid tax themselves.

The new rules will require private sector businesses to apply complex employment status tests to decide whether a contractor is genuinely self-employed or, in the words of HMRC, a “disguised employee”; if it's the latter, the onus will be on the private sector business to ensure that the contractor is taxed accordingly.

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