Method Accounting
Method Accounting

What is IR35 and how would it affect the way I am taxed?

3 February 2017

IR35, also known as the intermediaries legislation, was introduced in April 2000 as an anti-avoidance measure designed to tax “disguised employment” at a rate similar to employment. “Disguised employment” in this context means workers who receive payments from a client via an intermediary, for example their own limited company and whose relationship with their client is such that had they been paid directly they would be employees of the client.

The tests applied to decide whether a situation is “disguised employment” or not revolve around whether the terms of a contract and how it is performed meet HMRC’s definition of self-employment. Those contractors who fall under IR35 rules will be liable to taxation and national insurance as if it were a wage or salary and will not be able to take advantage of the favourable taxation and national insurance rates applying to the payment of dividends. Each contract is considered separately and we can assist you to obtain the best advice in dealing with the IR35 legislation and how this will affect you.

The Autumn statement published in November 2016 is sought to change how taxation is collected for contractors within the public sector. Please contact us if you have any question regarding IR35.

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