What is IR35 and what does it mean for contractors?
What is IR35?
IR35 is the common name for the Intermediaries Legislation which is designed to combat a form of tax avoidance whereby individuals are providing services similar to an employee but through a personal service company.
Some of the criteria used to determine whether someone is ‘inside’ or ‘outside’ IR35 is common sense; if you act like and are treated like an employee you should be taxed as one. However, there are a lot of grey areas in the legislation and some points which may seem relatively insignificant can have a major impact.
What is Inside and Outside IR35?
To be ‘inside IR35’ means that you are considered, for tax purposes, an employee of your end client and therefore subject to PAYE.
To be ‘outside IR35’ means that you are operating as a genuine business, and therefore operating outside of the IR35 rules.
How do I know if I am Inside or Outside IR35?
For public sector contractors (and private sector from April 2021), your end client is responsible for determining your status. They are likely to be using HMRC’s CEST tool, or an independent service.
For private sector contractors, you are currently responsible for your status. To determine your status, you should have your written contract reviewed for IR35 compliance and assess your working practices.
How is IR35 policed?
If you are operating ‘outside’ IR35 and taking dividends from your company, you run the risk of being on the receiving end of an IR35 enquiry. This is effectively an investigation where HMRC review your circumstances and ultimately decide if you have been paying tax correctly.
If they decide that you are a ‘disguised employee’, you will be required to make a deemed payment, effectively paying back all tax and NI you would have paid if you were an employee (plus interest and a possible penalty).
Don’t just take our word for it, here are just a few of the comments we’ve received so far
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I would recommend elevate to anyone around Wiltshire/Swindon area and I would like to be paid by them again in the future
Professional and personal at the same time; fantastic.
I approached Daniel at Elevate to help me payroll a good size cohort of contractors. Daniel was always super helpful; thinking outside the box and coming up with ideas to support not just the contactors but for me as well. Daniel is always upfront; honest; flexible and above all, put my contractors at the forefront by always working hard to ensure they were paid on time or even early in most cases which always went down really well with the guys thus creating a better working environment. The team at Elevate have been readily available for any urgent queries and have been able to offer some great guidance. My contractors have valued being with Elevate and all of them hope to be able to stay with Elevate moving forward.Operations Director
I would go nowhere else to payroll now. I have been approached by many for the business; and its clear to me that Daniel will not only work over and above to maintain excellent customer/client services but will do so with the upmost integrity.
We genuinely feel like a partnership has been formed and wish all the best to Elevate and the team.