The basics of IR35

1st August 2016

By Walker Smith’s Junior Account Manager, Rachel Whittle.

In a nutshell, IR35 is the piece of Tax legislation that aims to diminish the false self-employed. It’s there to ensure that anyone working through an intermediary, such as a personal service company, are paying the right levels of tax and not exploiting the use of limited companies for the benefit of an increased net take home pay.

IR35 was implemented in 2000, though it’s only been in this current tax year that HMRC have really put a spotlight on the issue. The way you operate on your regular working day has a huge impact on your IR35 status, and there are certain clauses to keep your eye on as a contractor.

The guidelines on whether or not you fall inside the legislation are still unclear, which is why it makes it all the more important to have your contract reviewed by a tax specialist. Even if the legislation does apply to you, don’t panic! Walker Smith have plenty of solutions to cater for all different contractors, to ensure that all of your earnings are taxed in the most efficient and compliant manner.

An important point to remember when considering your IR35 status is that if it does apply to you, you’re not breaking the law; it just means that your earnings will be taxed slightly differently, and we’ll work with you to ensure your specific needs are met.

If the legislation doesn’t apply to you, then you may be entitled to extra benefits such as lower tax rates and the ability to claim for certain expenses. However, if you fall under a strict level of supervision, direction and control from the end client, agency or intermediary you’re working for, then HM Revenue & Customs will assume you are operating as a ‘disguised employee’.

If HMRC does investigate your case, then they will expect to see definite proof that you are outside of the legislation. They advise that you should keep clear and relevant records of the terms and conditions for at least 3 years, including contracts and contract reviews.

Advice surrounding IR35 can be confusing and misleading, so the best way to find out if you are affected is to get your contract reviewed by ourselves, which will also form part of the evidence for our case, should you ever need it.

Just email [email protected] for your FREE consultation today!