IR35 is a complex piece of legislation which generates significant media coverage, leading to lots of discussion and misunderstanding. This makes it difficult for contractors and agencies alike to keep up to date and ensure they’re fully compliant.
Non-compliance, however, can cause huge problems for businesses and contractors. It’s vital to be aware of your responsibilities if you are to continue operating effectively.
This IR35 guide will be regularly updated to explain IR35 simply and give all of the information you require to keep on top of this complex piece of legislation.
In short, IR35 is a piece of legislation aimed at cracking down on businesses and contractors who misclassify employees as self-employed workers and therefore underpay tax and National Insurance.
Originally introduced in 2000, IR35 has been modified regularly in the time since. The biggest changes, however, have appeared in more recent times, with new regulations for the public sector being rolled out in 2017. Following the completion of a public consultation in August 2018, the public sector changes are now scheduled to roll out to the private sector in April 2020.
IR35 was introduced to tackle the emerging issue of what HMRC refers to as ‘disguised workers’. The ‘Friday to Monday’ phenomenon is the most common example of this and describes incidents where a worker ‘leaves’ a business on a Friday, before continuing their role as a contractor through a limited company the following week.
Often, the issue isn’t this clear-cut. Many businesses will hire people who are employees in all but name yet are employed through a limited company on a contractor basis. IR35 sets out strict guidelines on when this is and isn’t acceptable in an effort to stop people or businesses taking advantage of the potential to do this.
Your typical law-abiding contractor should have no real concerns regarding the recent changes. Many businesses, however, hire employees as contractors to skirt paying employer national insurance or providing other benefits required of them. It is in cases such as this where the latest IR35 evolution could cause serious concerns for companies and contractors.
Although IR35 is a complex piece of legislation, there are some key elements you can consider to establish if you are operating within IR35 regulations:
Although not an exhaustive breakdown of the specific legalities surrounding IR35 compliance, these are the key factors any business or contractor should be aware of when establishing if they are operating within the boundaries of IR35.
Of course, not everyone wants to take the time to worry about this legislation. If this is the case, or you want to be completely sure that you are operating within the law, you can contact a member of our specialist team who will be able to simplify the process for you and offer guidance and reassurance.
Call us on 033 3323 1199.