The £15m IR35 Threshold: Is Your Business Still Responsible for Status Determinations?

The landscape of off-payroll working (IR35) is shifting. In a move to reduce the administrative burden on growing SMEs, the government has officially increased the "Small Company" thresholds — and for many North West firms previously classed as "Medium," this is genuinely good news. But whether the change applies to your business from April 2026 or April 2027 depends on your specific accounting position.

The New Thresholds

To be classified as a "Small Company" — and therefore exempt from the duty to determine a contractor's IR35 status — a business must now meet at least two of the following three criteria:

• Annual Turnover: Not more than £15 million (up from £10.2m)

• Balance Sheet Total: Not more than £7.5 million (up from £5.1m)

• Number of Employees: No more than 50 (unchanged)

When Does the Exemption Actually Apply to You?

This is where it is important to be precise, because the answer is different for different businesses.

The new small company thresholds apply to financial years beginning on or after 1 January 2025. This is a Companies Act mechanism, and it operates independently of the UK tax year — so the two do not align neatly.

There is also an important rule that prevents businesses from dipping in and out of small company status: a company must meet the new criteria for two consecutive financial years before it can formally reclassify. This means the earliest a business can exit the off-payroll rules is April 6, 2026 — and only if their financial year began on or after 1 January 2025 and they met the new thresholds across both of the relevant periods.

For businesses whose accounting year does not align in this way, the earliest point of exit is April 6, 2027.

The key questions are when your financial year end falls and whether you have satisfied the new criteria across the relevant consecutive periods. If you are unsure which category applies to your business, this is worth confirming with your accountant or a qualified IR35 adviser before assuming either way.

Correctly Issuing Status Determination Statements (SDS)

Until your business officially transitions to "Small" status, the legal requirement to issue an SDS remains. To ensure your SDS is compliant and protects you from a "Reasonable Care" challenge by HMRC, it must:

• Be specific: Avoid blanket determinations. Each assessment must reflect the actual working practices on-site.

• State the conclusion: Clearly define the role as "Inside" or "Outside" IR35.

• Provide robust reasoning: You must detail why you reached that conclusion, specifically referencing Control, Substitution, and Mutuality of Obligation.

How BCUK Supports You

As a specialist recruiter operating in construction and social housing, BCUK's role in IR35 compliance is practical rather than advisory. We ensure that the contractual arrangements we put in place accurately reflect real working practices — because the gap between what a contract says and how a contractor actually works on-site is where IR35 risk most commonly arises.

We are not tax advisers, and we would always recommend that businesses seek qualified IR35 or employment law advice specific to their circumstances. What we can do is make sure that the recruitment side of the equation does not create unnecessary exposure — and point you in the right direction when specialist input is needed.

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