IR35: What You Need to Know
IR35 affects all contractors working via a limited company, whether you’re new or you’ve been in the industry for a while.
With every job you take on, the contract will be different, expecting them to be the same without having to put any thought into it can sometimes can back to bite you later on.
Whether you’re new or you’ve been in the industry for a while, knowing the IR35 rules will help you massively, even if you have a specialist contractor accountant on the job.
Brookson delves into the IR35 and what you need to know before taking on contracting work.
When looking at the IR35 rules, they usually envelop a few parameters to determine whether or not you fall under the legislation. Control is a large part of that, evaluating how much control you actually have over your own provision of services. It’s essential to show that as you complete the work set out by the client, you always keep an appropriate level of control of how you go about doing that, and what methods you use. These are key to defining what a contractor is, otherwise, you’d fall within the realm of being an employee.
Another indicator for IR35 rules would be working obligations, whether or not either you or the client have the right to dismiss each other at short notice. According to HMRC, the right of dismissal is a significant factor in indicating whether somebody is an employee or a contractor. If there’s a fixed notice period in a working relationship, then it’s too similar to fixed employment, so may fall under IR35 rules. If, as a contractor, you do not have a choice whether you accept or decline work, you will also fall under these regulations, and risk an increase in tax.
The ownership of the equipment you use while working for a client is an area the HMRC may also take into account IR35. If a contractor provides the equipment you use, whether it be tools, laptops or ladders, then you’re buying assets in your own company. If the opposite is exact and you’re expecting the client to pay for tools and equipment, then you’re considered an employee as there’s rarely a time ,if ever, an employee is expected to buy their own tools to complete jobs.
If you receive any employee benefits while working for a client, then you quickly need to see to this as you’ll be caught under IR35. If you want to continue to work as a contractor, make sure that you do not receive employee benefits from the client as this will be flagged very quickly. The client cannot offer you holiday or sick pay, training courses or employee-based perks of any kind to Limited Company Contractors.
These are just a few parameters that the HMRC will look at for IR35, if you’re still unsure or you’d like to find out more about IR35, get in touch with a specialist contractor accountant, such as Brookson, today!
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