If you are reading this article you may be wondering what IR35 means for you or you may just want to gain an understanding of IR35. We aim to set out the main elements to IR35 below:
What is IR35?
IR35 is a set of tax avoidance rules the UK Government introduced in April 2000. The Government introduced IR35 due to concerns that some employees were taking on roles as contractors working through limited liability companies in order to gain tax benefits when in actual fact they were still carrying out the same role of an employee with the employer in question.
IR35 does not apply to all contractors and freelancers. It only applies to those who are not genuine contractors but are rather “disguised employees” trying to pay less tax than required.
Who falls under IR35?
You will need to seek independent legal advice on this particular issue. As a general overview, there are a number of factors you will need to consider, some are:
• You and the employer should have the right to terminate the contract immediately.
• How much control do you have over your working practices and arrangements? The more control you appear to exercise over your work and working patterns, the less likely you will fall under IR35.
• How much benefits does the employer provide you? If the employer provides you with any employee benefits such as holiday pay, pension contributions and insurance cover you are more likely to be regarded as a disguised employee.
From April 2017, public sector bodies engaging contractors are now required to decide whether that contractor is genuinely self-employed.
Would you like to discuss IR35 or other taxation matters further with us? Our team of expert accountants in Melton Mowbray are available to assist with any uncertainties.