If you are a contractor or freelancer that works with off-payroll workers, you have likely come across IR35. Misunderstanding or misapplying the IR35 rules can lead to issues such as tax liabilities, penalties and operational disruptions.
At Hanley & Co. Accountants, this month’s blog looks at IR35 and why it matters. For information, call us in Staveley, near Kendal on 01539 821869.
What is IR35?
IR35 refers to a set of UK tax legislation designed to identify whether contractors or freelancers operating through an intermediary (e.g. a limited company) should be classed as employees for tax purposes.
Also known as the Intermediaries Legislation, IR35 aims to close the gap, so employees and independent contractors pay fair taxes. If a freelancer or contractor isn’t considered as an employee for tax, they are outside of IR35. Therefore, they can pay tax and claim expenses through their limited company.
Why Might IR35 Apply to Me?
IR35 affects anyone who provides their services through an intermediary and works for a client under conditions that resemble employment and would be classed as an employee if engaged directly. This includes freelancers, self-employed professionals, and agencies.
If you are unsure on your IR35 status, the best starting point is speaking with your end client, as they will determine this.
Inside IR35 vs Outside IR35
If you work inside of IR35, you are deemed as an employee. This means you will pay taxes the same way as a PAYE employee.
However, if you are outside of IR35, you can claim genuine business expenses that are not available to an employee. You will be responsible for your own taxes.
Managing IR35 Tax Risks
Since April 2021, IR35 rules have created significant challenges for businesses that rely heavily on flexible workforces. HMRC expects all businesses with off-payroll workers to consider IR35 and introduce compliancy.
IR35 compliance should be reviewed regularly to ensure procedures are fit for purpose. Whether you are a contractor or a business with off-payroll workers, the financial risks of getting it wrong can be substantial.
How We Can Help
At Hanley & Co. Accountants, we can support both contractors and organisations with all aspects of IR35 compliance, including:
IR35 Contract Reviews
IR35 Assessment Reviews
Working Practices Assessments
Tax Planning by Those Affected by IR35
Contact Hanley & Co. Accountants
If you require IR35 advice or help, contact Hanley & Co. Accountants in Staveley, near Kendal. Serving across Cumbria, call us on 01539 821869. Alternatively, send us a message via our contact form and we will be in touch.
