As a QAccounting client, you will benefit from our day-to-day accountancy service and will also be safe in the knowledge that you have access to our IR35 partners, who are bona fide experts on hand for any IR35 concerns.
HMRC TAX LEGISLATION
IR35
What Is IR35?
IR35 is tax legislation that was introduced in 2000 in an attempt to prevent ‘disguised employment’. In simple terms, IR35 rules were designed to stop contractors who work through their own limited company paying less tax, when their working arrangement reflects employment, and they should be taxed as an employee.
There are many different factors to consider when setting IR35 status, which is why it can be difficult to make a decision without expert help. Because contractors working inside IR35 are taxed at a similar rate to an employee, it’s crucial that you are confident in your status and are paying the right amount of tax.
Contractors working outside IR35, on the other hand, are considered genuinely self-employed, meaning they can continue to pay themselves marginally more tax efficiently.
Does IR35 Affect Me?
If you’re a contractor and work through your own limited company or partnership, you need to be aware of IR35 and to a certain extent, clued up on IR35 reform.
Up until 2017, contractors had the power to set their own IR35 status in the public sector. However, HMRC believed contractors were abusing the rules and deliberately avoiding tax, so introduced reform. This handed public sector clients the power to set IR35 status, meaning that contractors are no longer able to decide whether the service they provide to businesses is a genuinely self-employed one or resembles employment. From April 2020, this will also be the case in the private sector.
As a result of IR35 changes, contractors often seek professional advice, which can be vital when safeguarding status or even challenging and overturning inaccurate decisions made by clients.
Am I At Risk?
It is not illegal to operate within the scope of the legislation, but it is less financially rewarding, and failure to pay your taxes correctly as per the IR35 legislation could result in paying backdated taxes, plus interest and a potential penalty, if ever investigated by HMRC.
If any contractor receives a letter or correspondence from HMRC they are unsure of and are concerned that they may be at risk of an IR35 enquiry, they should speak to our IR35 partners for further advice.
How Can QAccounting Help?
Our contractor customers have access to IR35 contract reviews provided by our IR35 partners. You can also benefit from expert advice, representation in the event of an enquiry from HMRC and IR35 insurance for peace of mind. Our IR35 specialist partners review, on average, over 500 contracts every month, have defended more than 1,500 contractors and have saved independent workers approximately £35m in tax. If you’re confused or concerned about IR35, please don’t hesitate to get in touch with one of the experts.
IR35 Tips
Learning a little about the legislation is a good place to start. Do your research before signing a contract and familiarise yourself with the differences in working outside and inside IR35.
Having your contract assessed by an IR35 specialist can be vital in ensuring you are operating compliantly. After all, HMRC will inspect your contract before anything else when opening an enquiry. Access to an IR35 contract assessment provided by our partner experts.
Many contractors take out Tax Enquiry Insurance to cover the cost of legal defence in the event that HMRC decide to investigate.
Should you be working outside IR35 and HMRC opens an enquiry, you’ll need to demonstrate that your working arrangement reflects self-employment, not employment. This could be the specific terms in your contract or a record of anything that indicates you are genuinely self-employed, such as business insurance, an office address or even company website.
One of the biggest problems with IR35 is its sheer complexity. Deciding whether a contractor belongs inside or outside the rules isn’t always black and white. Therefore, don’t be afraid to reach out and ask for help. In the unlikely event that HMRC does contact you, our partners are available to help support and guide you through the enquiry.
Don’t worry, IR35 can be unnerving. If you’d like to discuss your situation with one of the IR35 specialists, please complete the form below and we’ll be in touch.
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If you're concerned about IR35, get in touch today and speak to one of our friendly in-house professionals. We look forward to hearing from you!
