IR35 Compliance experts

IR35 Compliance Specialists

Are you a contractor operating through your own limited company providing services to a third party, or are you, in fact, an employee? That’s the crucial question IR35 legislation is designed to determine, with significant implications for how much tax and National Insurance you might have to pay.

To complement our IR35 advice service, we have gathered all the essential information you need to understand what IR35 is, its origins, the Government’s objectives behind it, and how it may impact you as a genuine contractor.

We also provide updates on recent and upcoming IR35 changes, which have considerably affected the contracting landscape, alongside details of the specialist advice and services we offer to help you ensure compliance and pay the right tax.

A Brief History of IR35

IR35, part of UK tax legislation, was introduced by then Chancellor Gordon Brown in 2000 as a measure to combat tax avoidance and disguised employment.

The Government identified that some organisations were encouraging employees to resign and establish personal service companies, continuing to perform essentially the same work but on a contract basis to reduce their tax liabilities and National Insurance contributions.

This is often referred to as the ‘Friday to Monday’ scenario, where an individual leaves employment on Friday only to return to the same role on Monday as a self-employed contractor, thereby exploiting loopholes in the tax system.

Changes to IR35 in the Private Sector

The most significant recent changes to IR35 concern the private sector.

From April 2021, medium and large businesses in the private sector are responsible for determining and declaring the IR35 status of contractors engaged through a supply chain. They are required to use HMRC’s Check Employment Status for Tax (CEST) tool to assess whether contracts fall inside or outside IR35.

This follows a similar reform in the public sector in April 2017, where public bodies were made responsible for status determinations.

The off payroll working rules continue to evolve, and debates and reviews around IR35 legislation are expected to persist for years.

Why Your IR35 Status Matters

If HMRC assesses your working relationship and written contract and determines that you are ‘inside IR35’, your income will be treated as employment income for tax purposes. Consequently, you must pay income tax and National Insurance contributions through PAYE, similar to an employee.

If you are deemed ‘outside IR35’, as a genuine contractor operating through your personal service company, you can pay yourself via a combination of salary and dividends, benefiting from tax efficiencies and maximising your take home pay.

Understanding your IR35 status is critical to ensuring you pay the right tax and avoid penalties.

IR35 Contract Reviews

Contract reviews are an essential part of managing your IR35 status. They involve a detailed examination of your written terms and working practices to assess your employment status.

We offer a comprehensive IR35 contract review service that highlights key clauses, restrictive covenants, payment terms, and other factors that may affect your status determination. Our written report provides an opinion-based assessment to help you understand your position and make informed decisions.

Discussing your contract and working relationship with your agency, end client, and accountant early on can help clarify your status and reduce the risk of non-compliance.

Speak to Our IR35 Compliance Experts

If you have any doubts about your IR35 status, need specialist advice on your contract or working practices, or want to understand how the legislation applies to your situation, contact us today. Our team of IR35 compliance experts is here to help you navigate the complexities of IR35 legislation and ensure you remain compliant with UK tax legislation.