IR35
IR35 is one of the big uncertainties for sub-contractors. In the current economic environment more and more companies are not prepared to offer a fixed employment and instead require professionals (often specialists in their field) to provide their services on a contract by contract basis via their own personal service company. IR35 would see the majority of their earnings taxed via PAYE resulting in a worse tax and NIC position than a direct employment and with none of the security of employment.
Thus the ideal position is to be outside IR35 – but this is a classic HMRC “grey area”. The contract is often the first port of call and this can be reviewed by a specialist such as Qdos or Abbey Tax for a relatively low fee. But, more importantly HMRC now look at the true working situation and have a new Business Entity test which can be scored to test whether you are low, medium or high risk. Surprisingly many contractors who consider themselves outside of IR35 fall foul of the test.
I’d be happy to have a no obligation chat on IR35 so please feel free to call me.
PS. The new £2,000 Employment Allowance which comes into play in April 2014 will help to offset the employers NIC paid by personal service companies so if you feel that the terms of your contract(s) has changed and you may now fall into IR35 and wish to understand the calculation please do not hesitate to contact me.