IR35

What you need to know about IR35

IR35 is also known as ‘intermediary’s legislation’.

It’s a set of rules that affect your tax and National Insurance contributions. If you’re contracted to work for a client through an intermediary you will be affected.

The intermediary can be:

  • Your own limited company

  • A service or personal service company

  • A partnership

If IR35 applies in your situation then the intermediary must operate PAYE and National Insurance contributions on any salary or wages it pays to you during the tax year.

The rules are designed to make sure that the right rate of tax and National Insurance is paid for you.

In short: Contractors affected by IR35 lose the tax benefits of working via limited companies, and it is for that reason that many contractors opt to work through umbrella companies instead.

Who is affected by IR35?

Likely, anyone who operates using an intermediary. Clerical Workers, Teachers, IT professionals and more can all be affected by the legislation.

In basic terms if you perform a service under the same terms as if you were employed by the client you could be caught by IR35. Under the new rules you could possibly be considered a ‘disguised employee’.

What are the penalties for not following the IR35 tax rules?

The intermediary is always responsible for complying with IR35 legislation when it applies. If you’re a director of your limited company or a member of your partnership, you must make sure all relevant legislation is followed, and take responsibility for deciding if it applies for each of your engagements or not.

There can be significant consequences if you, your intermediary, or client ignore IR35 legislation. Interest and penalties can be charged on any extra tax and National Insurance contributions that are owed. Penalties can be more severe if it can be proved that IR35 rules or legislation have been deliberately ignored.

“Our trusted service is designed to keep our customer’s safe from unnecessary penalties”

What are my options as a contractor?

  • Take a work contract overseas?

    A family move overseas could be an option however most would see this as a drastic course of action when there are other solutions out there.

  • Do absolutely nothing

    This is the easy option and the one some may take however we urge all affected by the IR35 changes to speak to one of our specialists as soon as possible to avoid being un-compliant.

  • Contract in the private sector

    This is an option, but the private sector has already seen a huge influx of NHS locums since the IR35 legislation was announced. Many contractors have found the next option to be the most effective as they can continue working in the exact same way as they are now.

  • Show that you are actually 'self employed'

    This is fast becoming the most popular option, it keeps you compliant with the IR35 legislation within the public sector but still offers many of the benefits of being your own intermediary. 

Why Choose Payments Pro Umbrella Payroll?

Our advisory team have worked tirelessly to ensure that our knowledge on HMRC legislation is up to date and accurate and most importantly, compliant.  There are other companies out there that promise big things but often deliver very little due to their lack of understanding of current legislation. Payments Pro Umbrella Payroll will always be 100% HMRC & IR35 compliant, ensuring that you stay on the right side of the law.

Once you have contacted us our experts will review you financial situation and let you know what your return will be and the process for joining us. Its really that simple…

To summarise:

If you work for a company on a regular basis you are legally regarded as an employee of said company even if you are on a flexible or fixed term contract.  This also applies if you are contracted by an agency to work for other companies.  The bottom line is that you are now responsible to pay the same tax and contributions as people employed in full time positions.

If you are still unsure if you come under IR35 you can use this tool setup by the HMRC which can be used to determine employment status for contractors in the public or private sector.  The HMRC states that it will stand by the result of any test, “unless a compliance check finds the information provided isn’t accurate.”

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