IR35

Deciding to become a contractor or a self employed professional can be a positive and rewarding lifestyle choice. There are a number of factors that you will need to take into account when making this decision such as the amount of legislation in place to ensure self employed workers are working compliantly.

IR35 is probably the most important of these and with over a decades experience in the field, Brookson have the knowledge and expertise that could be crucial to ensuring you and your company are working compliantly in the eyes of HMRC.

What Is IR35? 

IR35 is the industry name for legislation originally contained in Schedule 12 of the Finance Act 2000. This legislation came into force in April 2000 and states that if you are treated as a disguised employee of the agency or client, all of your income from that assignment should be taxed as if you are a disguised employee (i.e. subject to income tax and national insurance contributions).

As a contractor, your ‘IR35 status’ effectively determines your tax position with HMRC. As HMRC stated in the recent Dragonfly case:

“The aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise:

• For tax purposes, be regarded as an employee of the client; and
• For NICs purposes, be regarded as employed in employed earner’s employment by the client.”

There have been other high profile cases such as that of Larkstar Data Ltd and we have further information on other cases in our IR35 case law section.

Prior to the introduction of IR35, an individual could avoid being taxed as an employee on payments for services and paying Class 1 NIC by providing those services through an intermediary. The worker could take the money out of the intermediary, normally a Personal Service Company, in the form of dividends instead of salary, resulting in significant tax savings.

The legislation ensures that, if the relationship between the worker and the client would have been one of employment had it not been for an intermediary, the worker pays tax and NICs on a basis broadly equal to that an employee of the client would pay.

Brookson provide all their limited company customers with an IR35 Compliance Review as part of our standard services, as well as refresher reviews every 6 months, this way you can work with the peace of mind you aren’t taking any risks and continue to concentrate on what you do best, your job. 

What does IR35 mean for you?

If your contract and working practices mean that you fall foul of IR35, you will be required to pay tax and national insurance on your earnings as if you were an employee as opposed to your usual director’s fee and dividends.

With our IR35 Review Service, we can give you peace of mind that your are working compliantly and are genuinely entitled to the income you are taking from your company.

To get started or to find out more - please call us now on 0845 058 1400, chat live with one of our experts or download our free guide on becoming a contractor and choosing the best way of working.