IR35 Advice for Contractors

IR35 is legislation brought in by the Government in April 2000, to counter what HMRC class as a disguised employment. 

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For example 

An example of disguised employment would be if a permanent employee were to leave their company on a Friday afternoon then return to work on the Monday, at the same company, doing the same job role, but as a contractor rather than a permanent employee.

The aim of the IR35 legislation is to stop people leaving full time employment and then returning to the same job immediately as a contractor working through their own Limited company, in order to reduce their tax liability and their NI payments.

IR35, what does it mean for you?

If your contract has the same level of risk, responsibility, liability and control as a permanent employee,then you would be classed as inside or caught by IR35 legislation. This means you will have to pay full tax and full National Insurance (instead of the usual salary and dividends from the profits of your company) and reduced expenses i.e. you'll earn less money This is because HM Revenue and Customs believes that as you aren't taking the financial risks or have the same level of control as a director of your own limited company, you aren't entitled to the same corporate tax structure.

If you are inside/caught by IR35 is there any benefit in trading through my own limited company?

If your contract is in the private sector, you can still claim 5% of your turnover, other expenses such as pension contributions and receive interest on the funds held within your own company. If your contract is in the public sector, new rules apply from 6th April 2017. Further information can be found on IR35 Public Sector Changes.

Download our free Guide to Expenses for further information on expenses that can be claimed by Contractors working through a Ltd company and fall outside IR35.

The only way to be sure whether your contract falls inside or outside IR35 is to have it review by a specialist. SJD are one of only three firms in the UK who advise The association of Independent Professionals and the Self Employed on IR35 and so are well qualified to give you the correct advice.

To request an IR35 review please fill in the below form:

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