What Size Company Does IR35 Apply To? Corporate Thresholds Explained
Determining whether your organisation must comply with the off-payroll working rules depends entirely on corporate size. The legislation places the compliance burden on the hiring entity, provided it exceeds specific statutory thresholds. Understanding these parameters ensures your business avoids unexpected tax liabilities and remains fully compliant.
What size company does IR35 apply to?
The off-payroll working rules apply to all medium and large companies in the private sector, as well as all public sector organisations. Small private sector companies are exempt from these regulations.
When a hiring business is classified as medium or large, it is legally obliged to assess the tax status of its contractors and should issue a Status Determination Statement (SDS). For engagements with small businesses, the responsibility for determining IR35 status and paying the correct tax remains with the contractor.
What are the small company thresholds for IR35?
A private sector company is classified as small under IR35 if it meets two or more of the following criteria in an accounting year (for financial years that begin on or after 6 April 2025):
- Annual turnover: Up to £15 million
- Balance sheet total: Up to £7.5 million
- Average number of employees: Up to 50
These thresholds apply to financial years under the Companies Act 2006. If your business exceeds two of these metrics, you begin the transition to medium status under the two-year rules, meaning you must prepare to implement a robust IR35 compliance framework. Group structures must aggregate their global figures to determine their overall size status.
Does the IR35 small company exemption apply to the public sector?
No, the small company exemption does not apply to public sector bodies. All public sector organisations must comply with the off-payroll working rules regardless of their size.
All public sector organisations must assess contractor status. Size criteria only dictate compliance exemptions for private sector businesses, meaning even the smallest public entities bear full statutory compliance responsibilities.
Partner with the IR35 experts at IR35 Shield
Navigating corporate thresholds, transition periods, and group structures requires expert oversight to eliminate financial risk.
Partner with the industry experts at IR35 Shield; we’re here to support you and your business every step of the way. If you need help with your IR35 processes, feel free to reach out. You can email us at info@ir35shield.co.uk or get in touch with an expert to find out how we can help.
