IR35 doesn’t have to be daunting. At BSO Fintax, we break down the complexities so you can focus on what you do best.

What is IR35?

IR35 is UK tax legislation designed to tackle tax avoidance by workers who supply their services to clients via an intermediary, such as a limited company, but who would otherwise be considered employees if the intermediary was not used. Essentially, it ensures that individuals working like employees pay similar tax to employees.

Why Was IR35 Introduced?

Introduced in 2000, IR35 targets what HMRC calls ‘disguised employees’—contractors who use a limited company structure to pay less tax than they would as regular employees. The aim is to ensure fairness in tax contributions, ensuring that those who are, in effect, working as employees are taxed accordingly.

Who Does IR35 Apply To?

IR35 applies to personal service companies, typically limited company contractors. From April 2021, medium to large private sector organisations, along with their supply chains, must also determine the IR35 status of any contractors they engage. This follows similar rules introduced in the public sector in 2017.

How is IR35 Determined?

IR35 status is determined by examining both the contract between the contractor and the client, and the actual working relationship. HMRC will assess whether the contractor is operating as a genuine business or effectively as an employee. It’s crucial that both the contract and working practices align to ensure compliance.

How is IR35 Enforced?

If you’re operating ‘outside’ IR35, you may be subject to an IR35 enquiry by HMRC. If HMRC determines that you are a ‘disguised employee,’ you could be required to pay back taxes, National Insurance, and potentially face penalties. This can lead to significant financial consequences, making it vital to get your IR35 status right.

Navigating IR35 requires expertise. At BSO Fintax, our team is here to guide you through the process, ensuring compliance and peace of mind. Contact us today to learn how we can support your business with IR35 and other tax matters.