IR35 – Are you aware of your business’ obligations?
Annalie King Employment Consultant Solicitor at Kerseys explains.
What is IR35?
IR35 also known as “off-payroll working,” refers to the United Kingdom’s anti-avoidance tax legislation. The purpose of the IR35 regime (and of other regimes involving intermediaries) is to prevent the avoidance or reduction of tax and National insurance contributions (NICs) by employees who are disguised as contractors.
Essentially, IR35 affects all contractors who do not meet HMRC’s definition of ‘self employment’.
What are the off-payroll working rules?
The off-payroll working rules can apply if a worker (sometimes known as a contractor) provides their services through their own limited company or another type of intermediary to the client.
An intermediary will usually be the worker’s own personal service company, but could also be any of the following:
- a partnership
- a personal service company
- an individual
The rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same Income Tax and National Insurance contributions as employees.
The client is the organisation who is or will be receiving the services of a contractor. The client will be responsible for determining if the off-payroll working rules apply. HMRC will be able to levy fines and interest for failure of businesses to comply with IR35. It is, therefore, important to ensure that your business is compliant with IR35 in order to avoid backdated demands from HMRC.
Gary Lineker and IR35
Football star and pundit Gary Lineker has made the headlines as it emerged the Match of the Day presenter was being pursued by HMRC over a tax bill of nearly £5million.
Warnings have been issued for self-employed workers who could be hit by the same IR35 tax legislation.
HMRC have taken the view that Gary Lineker should have been operating “inside IR35” on contracts held at the BBC (2013 – 2017) and at BT Sport (2015 – 2018).
High-paid freelancers like Gary Lineker now pay more tax by operating via a limited company than an employee on the same salary.
The tax efficiency by hiring someone as self-employed is by the firm that hires them, in this case the BBC, have avoided having to pay the Employers National Insurance.
Contact Kerseys Employment Solicitors
If you, as contractor or as a business recruiting staff as self-employed personnel would like further clarification of the IR35 rules and the measures you need to put in place to safeguard yourself and your business, contact Annalie King at [email protected] or telephone Ipswich 01473 213311 or Colchester 01206 58454.
Alternatively you can click “Call Me Back” where a member of our team will be happy to contact you.Our HR Services