IR35 For Dummies



What Is IR35?


IR35 has been around in one form or other since 2000. the legislation is designed to identify 'disguised employees' and ensure fair taxation for on and off payroll workers.


IR35 is a tax legislation designed to combat 'disguised' employment amongst the self employed. It is a set of rules that defines clearly the difference between true self employed contactors and full employees.


In simple layman's terms IR35 is a law that decides if you should be paying income tax & national insurance based on the kind of work you are doing as a normal employee would, or are you actually doing proper contracting work and thus can be paid through a ltd company and get the tax benefits such an arrangement allows.


Am I Inside Or Outside IR35?


Since April 2021 the determination of who falls under IR35 rules falls to the end client. Contractors used to make this determination themselves but this has been changed.


The IR35 status of a contract will now be determined, documented and communicated to contractors before any work commences on a new contract.


IR35 status is decided by the following four factors:


Mutuality of Obligation

Is the client obliged to provide additional work for off-payroll workers outside of the original project? Are they obliged to accept the work?


Substitution

Can a substitute be sent in the off-payroll (contractor) worker’s place?


Supervision and Control

Can off-payroll workers work to their own time and actions or are they under employer control on a daily basis?


Part and Parcel

Are off-payroll workers embedded in the workforce? For example, do they have line management responsibilities?


Guidance


If you are unsure about your current contract, future work or need more info check out the GOV.UK Check Employment Status for Tax tool. Or give us a ring and we can talk to you about the details any time!