What you need to know about ir35

IR35

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What is IR35 a brief introduction

Tax Legislation Introduced  to  counter  tax  avoidance  by  individuals  supplying  their  services  to  client  via  an  intermendiary.        

Disguised Employees Are  what  HMRC  are  looking  for.  Disguised  employees  are  contractors  that  get  all  the  benefits  of  being  employed  but  the  tax  benefits  of  using  a  limited  company.  

Here to stay IR35  is  here  to  stay.  It’s  too  important  for  HMRC  to  keep  it  in  place  as  it’s  so  easy  for  contractor  to  work  around  the  rules  if  it  not  in  place.  One  idea  is  to  combine  PAYE  and  NaJonal  Insurance.    That’s  not  going  to  happen  any  Jme  soon.    

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Financial impact of IR35 Let the chart do the talking

£20   £30   £40   £50   £75   £100   125  £0.00  

£2,000.00  

£4,000.00  

£6,000.00  

£8,000.00  

£10,000.00  

£12,000.00  

Rate Per Hour

A"er  IR35  

Before    IR35  

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Control Substition

Financial risk Part & Parcel

Business Entity tests The test that makes IR35 simple!

Contractors    are  brought  in  by  companies  to  use    their  specialist  knowledge  that  they  don’t  process  inhouse,  so  it’s  important  make  sure  you  have  control  over  the  work  you  perform.      

SubsDtuDon  in  a  contract  allows  you  to  send  a  replacement  to  perform  the  contracted  work.  This  is  one  of  the  key  areas  that  place  contractors  outside  of  IR35.  

Contractor  should  be  exposed  to  an  element  of  financial  risk  to  be  outside  of  IR35.    Risks  can  be  shown  in  a  number  of  ways;  invoicing  for  the  work  or  working  on  a  fixed  price  per  project.    

O"en  it's  easy  to  mistake  a  contractor  from  a  permanent  employee  but  it’s  important  for  contractors  to  visible  as  temporary  staff  and  not  considered  one  of  the  team  

Mutuality of obligation

Equipment

Mutuality  of  ObligaDon  (MOO)  means  a  contractor  is  not  expected  to  accept  another  contract  from  the  client  and  the  client  is  not  expected  to  offer  one.  

This  is  a  very  difficult  test  of  IR35  as  most  clients  will  want/need  you  to  work  on  their  computers  and  networks.  Unfortunately    equipment  can  be  related  to  a  number  of  different  secDon  within  the  Business  EnDty  Test  

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