IR35

 

The Intermediaries legislation (IR35) was introduced in 2000 to stop workers from using their companies to avoid paying tax and National Insurance contributions in cases where otherwise they would have been regarded as employees.

Before IR35, a worker could avoid employee tax and National Insurance contributions by providing services through an intermediary like a company and taking money out as dividends instead of salary. As dividends are not liable for PAYE and NICs, workers would be able to retain much more of their income.

Are you inside or outside of IR35?

It depends on your circumstances and the nature of the contract with the end client. In general, you are self-employed and outside of IR35 if:

  • you can hire someone else to do the work for you
  • you risk your own money
  • you provide the main equipment necessary for the job
  • you agree for a fixed price regardless of how long the job may take
  • you are responsible for deciding what is done, where and when 
  • you regularly work for a number of different clients
  • if you get it wrong, you have to put it right in your own time and at your own expense

Vice-versa, you are likely to be employed and subject to IR35 if:

  • you have to do the work yourself
  • someone else tells you what to do, when, where and how
  • you can be moved from task to task
  • you work 9-5, Monday to Friday
  • your are paid by the hour, week or month
  • you get paid extra for working overtime or at weekends

It must be stressed that IR35 applies to individual contracts, not to a company's business as a whole. Your company may have a variety of contracts, some subject to IR35 and some not. Our licensed web platform, Conto Instant, allows you to deal separately with both. 

However, if your business is mainly subject to IR35, you may find it more convenient to use our Umbrella solution, Conto Direct UK PAYE, where we will take over the administrative and paperwork burden and ensure total tax and National Insurance compliance. 

HMRC offers a service of Assistance and Free Advice and reference material on IR35 legislation and a guide to employment status for tax and NI contribution entitled Employed or Self-Employed? 

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