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IR35 Guide

The IR35 legislation was introduced by HMRC (Her Majesty’s Revenue and Customs) in April 2000 and was intended to combat tax avoidance. It affects all contractors who do not meet HMRC’s definition of ‘self-employment’ and applies to anyone working via an intermediary such as a company or partnership. Over time, since the introduction of the legislation, tests have been developed from the results of legal cases which indicate whether or not an individual’s working practices are likely to fall inside or outside of IR35. In this document we will cover:

  • What is IR35
  • Should I operate outside of IR35?
  • Is my contract caught by IR35?
  • Can I make my contract fall outside of IR35?
  • What does it mean if I am inside IR35?
  • What happens if I am investigated?
  • Which option is best for me? Umbrella vs Limited.

Extract from The IR35 Guide:

SUMMARY:
The IR35 tests are used to determine whether, if it were not for the intermediary, the contractor would be an employee of the end client. The contract must be totally representative of the individual’s working practices and would fail the IR35 ‘test’ if this is not the case. Your IR35 status determines the way that your earnings must be processed; if you fall inside IR35 your earnings are subject to PAYE and so deductions must be made for income tax and national insurance contributions. If you are outside IR35 and you operate through your own Limited Company and not an intermediary, you can draw dividends from the company which do not attract national insurance contributions.

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IR35 Guide Form