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IR35 Guide

Sunday 16th March 2014

IR35 is now a well-known term in the contracting world, the tax legislation having been a hindrance to limited company professionals for over a decade. The term ‘IR35’ is the name given to the ‘Intermediaries Legislation’, a tax law introduced by HMRC targeting professionals who work through personal service companies (PSCs) as a way to avoid paying as much tax.

*The IR35 rules were first implemented in 2000 as a way to ensure that individuals working as contractors were not actually employees posing as contractors to not fall under the full PAYE tax bracket.*

How does it affect you?

The IR35 rules, although surrounded by much speculation aren’t really all that complicated. To calculate whether or not a contractor is ‘inside’ or ‘outside’ IR35 works quite simply; if an individual working as a contractor acts like, and is treated like an employee, then that individual should be taxed as one. Simple eh?

Despite this seemingly straightforward approach to the legislation however, there are still a lot of grey areas to IR35, and there is much speculation as to what counts as ‘inside’ or ‘outside’ the legislation. Despite the Revenue’s attempts to aid contractors in their own self-assessment through the much publicised Business Entity Tests, firm valuation of IR35 compliance is a hard goal to achieve, therefore as a contractor it is always best to consult an expert before making any decisions over your IR35 position.

All contractors working through PSCs run the risk of being subject to an IR35 enquiry. An ‘IR35 Enquiry’ is an investigation carried out by HMRC where a contractor’s circumstances are reviewed, and it is determined whether or not the subject falls inside or outside the IR35 rules.

Following an IR35 investigation, if the Revenue decide that a contractor is indeed working as a ‘disguised employee’, then the individual will be required to make a deemed payment, effectively paying tax and NI that would have been paid if the contractor was in fact an employee.

Staying outside of IR35

We work closely with IR35 experts Qdos Consulting that has an unrivalled record of defending contractors against IR35 status challenges. With the knowledge and skills at hand, as well as over a decade of experience, Qdos have the necessary expertise needed to fend off HMRC’s enquiries, by demonstrating that the worker operating through his own company is genuinely self-employed, rather than a disguised employee of his client.

For more information on Qdos give us a call on 0845 834 0269 or take a look at their website by clicking here.

For more information on IR35 take a look at our dedicated Knowledge Centre page – IR35 for contractors.

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