IR35 explained

3 for 2 IR35 offerWhat is IR35

The Intermediaries Legislation also commonly referred to as ‘IR35’ was first introduced as schedule 12 of the Finance Act in April 2000 by the Government. It was later included in the Income Tax Earnings and Pensions Act 2003 (ITEPA) and reinforced by the Finance Act 2013.

It was first put in place to address the growing number of individuals leaving their permanent jobs and returning as contractors through a Personal Service Company (PSCs). This was to avoid the correct payment of tax and National Insurance (NI).

How it can affect you?

IR35 legislation is applied on an assignment-by-assignment basis and applies to anyone supplying their services through an intermediary (Limited Company or Partnership). Although it does not determine what work can be carried out through a Limited company, it does determine how the tax on income from each assignment of work should be applied. Therefore, as a contractor or freelancer, you need to make sure that tax and NI are correctly applied and paid for all income earned through your company.

What are the IR35 tests?

There are 3 main tests that are applied on an assignment-by-assignment basis which look at your contract and working relationship with a client. This will determine whether an assignment is seen as ‘inside’ or ‘outside’ IR35:

  • Personal Service – is the assignment for a specific person or can your company send a substitute for that individual instead?
  • Control – is there a “Master & Servant” relationship for what work is to be carried out, when and where that work is completed?
  • Mutuality of obligation – is the client expected to provide further paid work and is the contractor expected to produce more work.

How we can help

From just £95 +VAT per review, our in-house specialists will provide pro-active advice on the IR35 status of any assignment. For more information on our IR35 contract review service please click here.

As a full FCSA member you can be reassured that our advice is up-to-date and our accountancy processes are audited every two years to ensure they are compliant with HMRC. To make IR35 a stress-free experience, call us today on 08000 325 326.