Explaining IR35

What does inside IR35 mean?

To be operating ‘inside IR35’ means that, under the IR35 legislation, you must pay the same tax as an employee. This could also mean that you are entitled to additional rights as an employee or worker (e.g. minimum wage, maternity pay, protection from discrimination).

If you’re found to be working inside IR35, you will usually have to pay a ‘deemed payment’ of income tax at the end of the tax year to account for any tax deductions or NIC that an employee would have paid. this to clients as part of our year-end pack and ask clients to approve this

The IR35 rules will result in an increased tax and N.I. liability and will prevent contractor companies from retaining profits to grow their business in the future.

Those contractors who fall under the IR35 rules will be liable to Schedule E taxation and National Insurance (N.I.), following deductions for expenses. Income will be in the form of a ‘deemed payment’, following these deductions.

Normal expenses may still be claimed. In addition, there is a provision for other intermediary expenses of 5% of a contractor’s turnover

Pension payments – either personal or executive schemes

Business travel –  incurred in the course of business duties

Subsistence – accommodation, meals when away from home

Professional Indemnity Cover

Am I outside IR35?

You are outside IR35 if the contract is with the limited company.

Does IR35 apply to you?

Background into IR35 & April 2020

IR35 was introduced to counter avoidance of tax by individuals providing personal services via a limited company.

IR35 – Making the decision

Decisions are made ‘on balance of probability’.

To make the process easier, HMRC has created a Check Employment Status for Tax (CEST) on their website. Answering a few questions say’s whether they think you’re employed or self-employed.

Written by Vegan Accountants

The expert team at Vegan Accountants take away the hassle and pressure of your accounts and tax compliance. Our wide-ranging services give us the flexibility to deliver tailored support for your business.

February 14, 2022

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