For most people, becoming a contractor or a self-employed professional is a positive and rewarding lifestyle choice.
But it is not a decision to rush into under-prepared. There a number of factors to take into account – not least the amount of legislation in place to ensure you pay the right amount of tax.
One of the most important of these rules is called "IR35". With more than a decade of experience working with IR35, we ensure you and your company keep on the right side of HMRC, paying the right amount of tax for each piece of work you undertake.
What is IR35?
IR35 is the industry name for a specific part of the Finance Act 2000. It aims to prevent people avoiding tax by working as self-employed contractors through an intermediary limited company, while performing the same function as regular employees.
For example, an IT technician might leave their permanent job on the Friday, only to return on the following Monday as a contractor, performing exactly the same job in the same was as they did before but working via a limited company intermediary.
The legislation says that these kinds of contractors are in fact ‘disguised employees’ and should be subject to the same Income Tax and National Insurance Contributions (NICs) as regular employees.
In other words, the legislation ensures that if the relationship between the worker and the client would have been one of employment if it wasn’t for the intermediary, the worker pays tax and NICs roughly equivalent to an employee.
Two of the most high profile IR35 cases which helped define this area of law are Dragonfly and Larkstar Data. To read about these and many other IR35 cases, visit our IR35 case law notes .
Keeping you IR35 compliant
Carl Henning
In House SolicitorIf your contract and working practices fall foul of IR35, you will need 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.
But with our IR35 Compliance Review, we give you total peace of mind that your are working compliantly and are genuinely entitled to the income you are taking from your company.
We provide all our limited company customers with an IR35 Compliance Review as part of our standard services, as well as six-monthly refresher reviews for total reassurance.
Mistakes can be costly. Do not leave yourself at risk of unexpected payment demands from HMRC .