IR35 And Disguised Employment
...What You Need To Know
IR35 legislation was introduced in April 2000 to prevent what HMRC consider “disguised employment”. If its title sounds like the name of a robot mercenary tasked with tracking down quasi-legal space privateers, you're not far off.
Before IR35, workers with their own companies could be paid directly to the company and distribute profits as dividends, which are not subject to National Insurance payments. They could also split ownership of their company with family members to place income in lower tax bands. HMRC were concerned people were leaving their permanent positions on Friday and returning to the same desks on Monday as Limited Company contractors.
IR35 was brought in so that all Limited Companies operate with the same risk and accountability. If your situation's essentially the same as if you were a permanent employee, you'll probably fall under IR35 and have to pay full tax and National Insurance.
Many people become contractors for the greater flexibility, while some are forced into it by organisations hoping to dodge the responsibilities that come with permanent staff. Either way, you can't get the full up-side of being a contractor when you're operating like a full-time employee. You'll have to consider each contract individually to see whether IR35 affects you, and it's worth talking to an expert if you're unsure whether you're within the rules..
There are many factors to consider to answer this. For example:
If you answered 'yes' to all of the above, HRMC probably consider you self-employed . However, answering 'yes' to most of the following may mean you're an employee for the contract in question, and therefore within IR35:
If you are looking for an IR35 accountant then RIFT Accounting can talk you through the more complex issues affecting your taxation status, and help determine the actions you need to take.