Understanding IR35 Rules: A Complete Guide for Contractors
What is IR35?
IR35 is a set of tax legislation designed to combat tax avoidance by workers supplying their services to clients via an intermediary, such as a limited company, but who would be an employee if the intermediary was not used.
Who Does IR35 Affect?
IR35 primarily affects contractors who work through their own limited companies or personal service companies (PSCs). If you're caught by IR35, you'll need to pay income tax and National Insurance contributions as if you were an employee.
Key Factors in IR35 Determination
- Control: Who has control over what work is done, when, where and how it's done?
- Substitution: Can you send someone else to do the work instead of you?
- Mutuality of Obligation: Is the client obliged to offer you work, and are you obliged to accept it?
Off-Payroll Working Rules (IR35 Reform)
Since April 2021, medium and large-sized private sector clients are responsible for determining the IR35 status of contractors they engage. This shift in responsibility means clients must assess whether the off-payroll working rules apply.
How to Stay Compliant
To ensure compliance with IR35 rules:
- Keep detailed records of your working arrangements
- Ensure your contracts reflect the true nature of your working relationship
- Consider professional IR35 insurance
- Seek professional advice for complex situations
Getting Professional Help
IR35 can be complex, and the consequences of getting it wrong can be significant. Our team of qualified accountants can help you navigate these rules and ensure you're fully compliant while maximizing your tax efficiency.