IR35 Consultation

Off-payroll working (or IR35 as it’s commonly known) has been around for 20 years now but in recent years HMRC has made strides in extending its reach so that more companies and more individuals are now affected than ever before.

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IR35 relates to people working through personal service companies for other organisations and this could include accountants, programmers, consultants, in fact, anyone who is acting like an employee rather than a supplier.

If a business is found to be employing people off-payroll then they could be liable for the employer’s NIC on the payments made and penalties and interest.

But conversely, companies that force people to become employees, when they don’t want or need to could find that they face difficulties recruiting the right level of contractors.

This means that IR35 can cause problems for companies and contractors alike.

What is IR35?

IR35 is an attempt to move people from the self-employed and personal service company community into the PAYE sector.

In its initial form, IR35 applied to a fairly narrow band of consultants who spent years working for a single company just as if they were employees.

In 2017 HMRC extended the scope of IR35 to the public sector and as a result, the number of consultants available to bodies such as the health service, local councils and even HMRC dropped dramatically.

The new off-payroll working rules will be further extended to the whole of the private sector in April 2021 to cover all businesses with more than 50 employees.

HMRC is convinced that this will provide a tax boost to the economy however many other independent commentators are less convinced! That having been said, IR35 is the law and it is important that businesses comply.

IR35 means that the employer is responsible for assessing the tax status of a contractor according to the guidelines and if the person is deemed to be ‘inside IR35’ or to all intents and purposes an employee they will need to make tax and NIC payments.

This shouldn’t be confused with being an employee for employment law purposes however as the two aspects are different and apply distinct rules.

Who does IR35 affect?

IR35 applies to all public bodies and from April 2021 will also affect medium and large private businesses.

A company falls into IR35 if:

it has an annual turnover of at least £10.2 million

is has a balance sheet total of at least £5.1 million

it has over 50 employees

Companies that fall into this range must apply the rules of IR35 and assess every contractor’s tax status.

IR35 for companies

If you own a company that uses contractors then you need to understand and apply the IR35 legislation.

You need to have in place a method of assessing the tax status of contractors and suppliers and you need to make sure that you are able to run the process effectively.

You’ll need to provide every contractor with their assessment or ‘determination’ and you also need to have an appeals process in place.

To top it all off you must apply the IR35 rules to each contract rather than each person. So even if you determine a particular contractor to be outside IR35 for one job, when they move onto another project you must complete another assessment

Our advice is not to guess.

The IR35 rules are so complex that even HMRC keeps losing cases at tax tribunals so the best bet is to take expert advice.

Let us help you with understanding the IR35 landscape and then setting up a process for you to follow with your contractors.

We can also act as an independent authority for your appeals process. Don’t delay, if IR35 affects you then get in touch now

IR35 for contractors

IR35 can be a minefield for contractors but what makes it worse is the amount of misinformation that is out there.

We’re constantly amazed at some of the ridiculous schemes we have seen to try and get around the rules.

The problem is that if you have been found to be using a tax-avoidance scheme, or even if you have just applied the rules wrongly, you’ll end up paying back tax, interest and possibly penalties.

The simple message has to be to get qualified advice on your individual situation.

Don’t rely on friends of friends, Facebook posts or umbrella companies who promise you that their tax-avoidance scheme is legal - it could cost you money!

Let us look at your situation and advise on the best course of action. We’ll look at you as an individual, the contract you are looking to take and the current legislation and case-law.

We can also advise where a company has issued you with a determination that you disagree with and we can fight your case.

And when it comes time to put in your CT600 or self-assessment we can help minimise the tax that you end up paying.

Call in experienced help

We’ve been dealing with IR35 for years and we know what it’s all about. Don’t chance it, get experienced and qualified help on your side so that you are covered.

Book a call now and let’s talk.

IR35 FAQ’S

What is an IR35 compliance check?

A micro business is a type of small business that employs fewer than 10 people, according to the Small Business Association, while small businesses can include businesses with up to 500 employees.

Are small companies exempt from IR35?

No, small companies are not exempt from IR35. IR35 rules apply to all types and sizes of companies in the UK, but small companies have different criteria for determining IR35 status.

Are sole traders exempt from IR35?

In the United Kingdom, sole traders can be affected by IR35 rules. IR35, also known as the "off-payroll working rules," primarily applies to individuals who work through an intermediary, such as a limited company or a personal service company (PSC).

What does it mean to be Outside IR35?

To be classified as "outside IR35," a worker's contract and working practices must demonstrate that they are genuinely in business on their own account, rather than being an integral part of the client's workforce.

What does it mean to be Inside IR35?

Being "inside IR35" is a tax status in the United Kingdom that applies to workers, typically contractors or freelancers, who are considered to be working in a manner that resembles employment rather than genuine self-employment. When a worker is classified as inside IR35, specific tax rules and obligations come into play.

When was the IR35 introduced?

IR35, also known as the "off-payroll working rules," was first introduced in the United Kingdom in April 2000. It was introduced as a tax legislation by HM Revenue and Customs (HMRC) to address concerns related to tax avoidance by individuals who were providing their services to clients or hiring organizations through intermediary companies.

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What's the process for completing your accounts!

step 01

We send you a reminder

We will request certain records from your business to help our team of specialists prepare your accounts. Our systems are automated with built in capabilities to make sure the risk of missing a deadline is reduced.

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Once you have provided the information, your dedicated accountant will prepare the accounts.This will be in a timely manner, providing you with flexibility.We have a rigid set of internal controls prior to finalizing the accounts, reducing the possibility of errors.

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Once your dedicated accountant has finalized your tax return, an independent Senior Accountant will also review.Our team will then request you to give the final approval prior to submission.