Baffled by IR35

Baffled by IR35 – Help is at hand

IR35 seems to be the term of the moment in contractor circles. The reason why it is such a hot topic is due to pivotal changes which, from this April, will affect anyone operating as a limited company (also referred to as Personal Service Company or PSC) and working for a public sector body.

A quick Google search produces a huge amount of information on IR35, much of it out of date and rather confusing. So here we’re going back to basics, with this quick guide to what IR35 is, what’s changing and what guidance and support is available to you.

For the uninitiated, here’s a quick sum up of IR35 to date:

  • Back in the late 90’s, HMRC caught on to the fact that some employees were leaving their employers and returning as a limited company the very next day, doing the same work, in the same place, in the same way.
  • HMRC saw this as “disguised employment” and in their eyes, such workers were short-changing the treasury by avoiding paying tax and NI on most of their income. To tackle this, IR35, also known as the Intermediaries Legislation was introduced.
  • Case law has seen IR35 evolve in the years since, but essentially it is a set of rules to identify workers who would be classed as employees if you removed the point that they have a limited company.

So what’s changing?

Currently, limited company directors working in the public sector decide and declare for themselves whether or not they fall outside of IR35. From 1st of April this decision is the responsibility of the public sector body they are working for. It is likely that many more limited company workers in the public sector will be “caught” by IR35 and the party paying them will have to operate “deemed payments”, i.e. deduct the same amount of tax and NI as they would for an employee.

Help is at hand

If you are operating as a limited company in the public sector you will be affected by these changes and need to consider your options from April.

For comprehensive, free advice in language that won’t baffle, go to IR35helpline.co.uk . It is a one stop shop for everything you need to know about IR35 and what is changing.

 

Additionally, to help us administer our responsibilities under the new rules, England Associates have appointed Liquid Friday as one of our payroll partners. Liquid Friday have been supporting contractors for 10 years and are highly respected Freelancer & Contractor Services Association (FCSA) members so you are in safe hands.