What is IR35?
If you want to work as a professional Contractor in the UK you need to know about IR35… especially if you’re thinking about going into business with your own Contractor Limited Company!
In this section we have provided lots of useful information on IR35, including;
- Where does IR35 Apply?
- IR35 Contracts – Overview
- IR35 Contracts – Right to Control
- IR35 Contracts – Mutuality of Obligation
- IR35 Contracts – Right of Substitution
- IR35 Contracts – Other Contract Factors
- Daily Working Arrangements
- IR35 Expenses
- IR35 Deemed Payment
- IR35 Investigations
If you are unable to find what you need or you would like to speak to a professional advisor about IR35 and going into business with your own Contractor Limited Company contact Commonwealth Contractors now!
To discuss your situation call now on 0330 390 9021 or Submit your Details and we will get right back to you!
What is IR35?
IR35 is the most important piece of tax legislation to affect freelance contractors working in the UK. If you fail to consider IR35 you could either wind up paying too much tax or face a large and unwanted tax bill in years to come!
IR35 affects the individual contracts that a contractor works on. If you work on a contract deemed to be:
- Inside IR35 – all contract billings (except allowable business expenses) must be paid in the form of employment income subject to full Pay as You Earn (PAYE) deductions.
- Outside IR35 – you can set up your own Contractor Limited Company and receive income in the form of tax efficient dividends. By receiving income in this way you can avoid large class 1 national insurance contributions and possibly improve you net retention by up to 25%.
To discuss how IR35 may affect you call Commonwealth Contractors now on 0330 390 9021 or Submit your Details and we will get right back to you!
Why was IR35 Introduced?
The Labour Government introduced IR35 (Intermediaries Legislation) in April 2000 in an attempt to remove the opportunity for workers to avoid employed levels of tax and national insurance by using an intermediary such as a Limited Company.
The government argued that if the intermediary were removed the worker would be considered an employee of the client and therefore subject to employed levels of tax.
Prior to the introduction of IR35 any contractor could set up a Contractor Limited Company and benefit from self employed levels of tax. Contractors would take a small salary, claim business expenses and otherwise take the remainder of income in the form of dividends. As National Insurance contributions do not apply to dividends the worker would pay less tax than if a normal employee of the client.
The Government estimated that it was losing a lot of money in tax revenue and decided to act with IR35.
Deciding whether or not you are Inside or Outside IR35 can be very complicated as it not only depends upon the terms and conditions of the contract but also the actual day to day working arrangements.
You must consider IR35 when agreeing a contract. If you fail to consider IR35 and take dividends when caught you could face a very large tax bill in future years.
Find out More
To find out more about Commonwealth Contractors call now on 0330 390 9021 or Submit your Details and we will get right back to you!