What is IR35?
IR35 was announced in the March 1999 Budget and became effective from 6 April 2000.
The legislation was designed to deal with "disguised employees", individuals whom the government believed were taking advantage of a corporate structure when they should have been taxed as any other employee.
A simplified example might be an IT contractor who had been working for the same client for 2 years, operating via his own Limited Company. The government argued that he, in effect, is an employee of that client, is not running a Limited Company in the traditional sense given that the company has 1 contract and 1 employee, and should pay Schedule E PAYE and class 1 National Insurance Contributions on all the income from that contract.
Should an investigation ever be done into your company, and the HMRC deemed your contract as falling within the IR35 criteria, then your income could be deemed to be salary subject to PAYE and NI. Failure to correctly account for PAYE and NI could result in significant penalties and interest.
The only way to be sure whether your contract falls inside or outside IR35 is to have it reviewed by a specialist. Our accountants are Professional Contractors Group accredited on IR35 and so are well qualified to give you the correct advice.
We can also offer you a IR35 compliant contract template to use when entering into new contracts with your clients.
If you are at all worried by IR35 or have any further questions please call us on 020 3713 4530 or request a call back.