As a contractor, understanding IR35 and whether you fall inside or outside can be a challenge. There’s lots of information surrounding the legislation, its technicalities and how it could affect your limited company.
We are here to help you unravel the mystery of IR35. Our comprehensive guide covers all you need to know, from the basics, its details and what it could mean for you as a contractor.
What’s inside the guide?
- What is IR35? – why was the legislation introduced and what does it mean.
- How is your IR35 status determined? – the factors used to assess your status.
- What to do if you’re inside IR35 – working tax efficiently and what it means for you.
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What is IR35?
IR35 is a piece of anti-avoidance legislation targeting Personal Service Companies (PSCs) which was established by the government to combat “disguised employment”.
If your contract has the same level of risk, responsibility, liability and control as a permanent employee, you would be classed as inside IR35. In this instance, you will be treated as a PAYE employee.
What does IR35 mean for you?
IR35 can affect the way you operate your business. If your contract is found to be inside IR35, you will not be able to benefit from the same tax efficiencies than you otherwise would.
However, there are still ways in which you may be able to operate to make the most of your money.
How is your IR35 status determined?
HMRC’s complex test considers a number of factors when looking at your contract, including:
- Direction and Control - how much control does your client have over your working conditions?
- Substitution - do you have a replacement to undertake your work in the event that you cannot fulfil your duties?
- Mutuality of Obligation - are you required to complete a specific task or is their scope for your client to ask you to perform additional duties?