IR35

I have heard of IR35, what is it?

The term 'IR35' is used to describe a piece of tax legislation which came into force in 2000. The intention was to prevent the practice of 'disguised employment'; prior to IR35, some professionals had established themselves as 'contractors', when in fact they were employees in all but name. IR35 sought to prevent this by creating a notional contract of employment between the contractor and the end user client and assessing whether it was in fact a 'disguised employment" relationship.

The IR35 legislation has proved very difficult to enforce, and there is a growing industry of "specialists" who claim to be experts in writing IR35 friendly contracts.However, as employees of Sprite's Umbrella Company will be paid on the basis of employment, with all income paid as a mixture of salary and allowable expenses, the IR 35 legislation is not applicable. Or to put it another way if all your earnings are through Sprite's Umbrella Company then all your PAYE and NIC is paid according to HMRC rules and there is no need to worry about IR35.

IR35 and my own Limited Company

For those working through their own limited company the rules surrounding IR35 are very relevant and you should seek professional advice on whether your contractual and service arrangements are likely to be caught by IR35. It is worth making it clear that it is not Contractors who are inside or outside IR35. It is the arrangments under which the services are supplied that are in or out. It could be that a contractor has three contracts in a row, where the first is outside, the second is inside, and the third is outside again. It is therefore important that those working through their own limited company have clear advice and guidance on this important topic.

IR35 and the Construction Industry Scheme (CIS)

It is unlikley that this will be applicable to any self-employed workers contracting with Sprite as to come within both IR35 and CIS, a subcontractor must be working through their own limited company or partnership in such a way that, in the absence of the limited company or partnership, he or she would have been an employee of the client.

If you would like further guidance on any aspect of IR35 and how it may impact you please call us.