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What is IR35?
IR35 or the Intermediaries legislation was designed to combat what HMRC saw as tax avoidance by “disguised employees”.
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What is a disguised employee?
Essentially a worker, who if it was not for the fact that they operate through a limited company, would be deemed an employee based on their relationship and working practices with their end client.
Who does IR35 affect?
Contractors operating through their own Limited company, recruitment agencies and end clients.
When does IR35 apply?
The IR35 should be applied to every new contract and contract extension.
What does it mean to be caught by IR35?
If “caught” by or “inside” IR35, a contractor is a “disguised employee” and will pay tax as an employee.
If “not caught” or “outside” IR35 a contractor is deemed to be in business in their own right and a business to business relationship exists.
How is IR35 determined?
There are three key employment test areas to consider, along with becoming part and parcel of a client organisation
Personal Service “Personal service” exists if a worker is required to attend and they do not have the ability to send someone else in to carry out the work instead of them |
Control This is a measure of how much “control” the end client has over where, when and how the work is performed. |
Mutuality of Obligation (Moo) “Moo” exists where an end client has to offer work to an individual under the terms of a contact and the individual has to accept it |
Part & Parcel Contractors should be conscious of slipping into a business as usual role and taking part in the end client’s normal activities usually associated with employment |
Who determines IR35?
Currently contractors working in the Private sector carry the responsibility to determine the IR35 status of their contacts and are ultimately responsible for ensuring that the correct Tax and NI is paid.
Since April 2017 the rules have been different in the Public Sector. Responsibility for determining the IR35 status sits with the Public Sector body engaging the worker. If the contract is deemed “inside” IR35, then the party paying the Limited company, the “fee-payer”, must tax the contractor at source as they would an employee on their payroll.
What is changing?
Draft legislation has been issued that changes the rules in the Private sector from April 2021. The key changes are:-
Still not sure?
IR35 is complicated. We recommend speaking to an expert in IR35 legislation. Orange Genie Accountancy works alongside Bauer and Cottrell, IR35 specialists. Bauer and Cottrell will review not just your contract but importantly will look into the working practices between your end client and you the contractor. They will then be able to tell you if your contract would be seen to be inside or outside or IR35. Also, you can find more information from our IR35 news platform.
If HMRC does decide to review your status, Bauer and Cottrell will support you and put the facts to HMRC; they are yet to lose a case, so you know you would be in safe hands.
To find out more about Bauer and Cottrell or how Orange Genie Accountancy can help you with setting up your limited company, please call 01296 468 185 or email accountancy@orangegenie.com.
Why Orange Genie Accountancy?Orange Genie Accountancy offers fixed fee accountancy packages to contractors and freelancers. Each client has unlimited access to their own dedicated approachable and friendly accountant. All Orange Genie Accountancy accountants are specialists in the contracting market, so they can give you bespoke, high quality advice. We will always keep you informed about anything that could affect you and your company. Our relationships with our clients are extremely important to us so we'll be in touch often, whether it be face to face, over the telephone or email. Our packages start at £75 + VAT a month for an online service. Our most popular package is £120 + VAT a month which provides you with your very own dedicated accountant as well as:
And much more, includingaccess to wealth management advice, IR35 reviews and pensions planning. If you would like to appoint Orange Genie Accountancy as your accountants please either fill out our enquiry form or give one of our friendly expert accountants a call on 01296 468 185 or email accountancy@orangegenie.com. |
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