IR35 IN A NUTSHELL

IR35 by definition is the Inland Revenue’s budget press release number 35 (IR35, get it?) What IR35 refers to is intermediaries legalisation announced in the budget of 1999. The purpose of the legislation is to prevent individuals from disguising employment as a third-party contract or self-employment to gain financially utilising tax benefits not available to full-time employees.

This is still a much-debated measure and the question every wants answered is: are you inside or outside of IR35? If you work under an umbrella company you are already their employee and IR35 would have no bearing.

Within IR35: to be deemed an "employed type" contractor means you have a structured role under the supervision and direction of the end client. The end client determines how, when and where the work is completed, along with supplying all relevant equipment.

If your contract role brings you within the remit of IR35 the umbrella company option is best suited for your circumstances. You would not be able to benefit from running a limited company by claiming dividends. To discuss your personal circumstances contact one our advisors.

Outside IR35: to be deemed a "self-employed type" contractor means you have more control and are carrying out a consultancy-type role. You determine how, when, and where the work is completed, and provide your own equipment. You may also be taking on financial risk due to a possible fixed-price contract.

If your contract keeps you outside of IR35 regulations, you can process your payments via a limited company by way of dividends (company profit). You will require your own limited company, also known as a personal service company (PSC).

IR35 - THE POTENTIAL RISK TO YOU

It is critically important that anyone working via their own a limited company has a comprehensive understanding of IR35 legislation. If HMRC deem you to be within IR35 the financial liabilities to you could be great. It is crucial you seek professional guidance.

If you require further help surrounding IR35
Contact Liberty Bishop for more information.

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