What is IR35?

The intention of IR35 was to prevent the Government losing tax revenue, by people allegedly avoiding tax by working through their own company (personal service company) whilst performing work in the manner of an employee.

IR35 refers to the intermediaries legislation of 2000. It was introduced to prevent people who would ordinarily be seen as employees by HMRC from being taxed as if they were self employed. It's aim was to target individuals setting up as a contractor and working through a Limited Company.

An example that HMRC has cited is an IT specialist who leaves his permanent job one Friday and returns the following Monday as an IT contractor working through his own limited company. He is doing exactly the same work as before paying less tax and national insurance as he is taking his money by paying himself a small salary (on which tax and NIC is payable) and the bulk of his income as dividends.

To be outside of IR35, you need to carefully consider your contracts and working practices. You need to be able to demonstrate to HMRC that you have control of how you undertake the task, show you are bearing financial risk, have the right to send a substitute worker and that there is no Mutuality of Obligation between the parities.

Ypur status neesd to be reflected in both your contractual terms and the way you in which undertake your contract.

Freelancer Accounting can provide specialist advice on IR35.

Freelancer Accounting is a specialist provider of fixed fee accountancy services to freelancers and contractors in London and the South East of England.

We understand that tax is complicated and are happy to offer you face to face meetings at one of our office locations convenient to you.

You will have your own dedicated accountant as a point of contact.

We are accredited by the Professional Contractors Group (PCG) and are an ACCA Practice, so you never have to worry about you tax and accounting affairs again.

If you are thinking of contracting or an existing contractor with questions and would like further advice, please do not hesitate to call your local FreelancerAccounting office on 0800 1357157 or email martyn@freelanceraccounting.com