What is IR35?
IR35 is a piece of HMRC legislation which all contractors need to be aware of. If a contractor is operating through an intermediary (e.g. a limited company) and if it weren’t for that intermediary, they would be an employee of their client, then IR35 applies.
If IR35 applies, then tax and national insurance must be deducted from the fees that you earn from your client and paid to HMRC. We, as an umbrella company, can take care of all of this for you with the end result being that you receive a weekly or monthly payslip with nothing further to do on your part.
There are many factors to consider when determining whether or not IR35 applies, that’s why we provide an IR35 review to our clients each time they start a new engagement. The main factors to consider are:
- Will you perform office holder duties (e.g. be a board member) for the end client as part of this engagement?
- Have you arranged for someone else (a substitute) to do the work instead of you, if you are not able to?
- If you sent someone else to do the work (a substitute) and they met all the necessary criteria, would the end client ever reject them?
- Has your business needed to pay a helper to do a significant amount of the work?
- Can the end client move you to a different task than you originally agreed to do?
- Once you start the engagement, does the end client have the right to decide how the work is done?
- Can the end client decide the schedule of working hours?
- Can you choose where you work?
- What will the worker provide at their own cost (e.g. materials)?
- What is the main way you are paid for this engagement (e.g. a daily rate, upon deliverables, a % of income generated for your client)?
- If the end client is not satisfied with the work, do you need to put it right at your own cost?
- Are you entitled to benefits such as sick pay or holiday pay from the end client?
- Are you responsible for hiring and dismissing workers for the end client?
- Do you interact with the end client’s customers, clients, audience or users?
From April 2020, there are changes to the IR35 legislation coming into effect, click here to find out more.
If you would like to discuss our services or have a free phone consultation over the merits of umbrella companies v limited companies please give us a call.
You can also find out more about the limited company services provided by our sister company, Elver Consultancy Limited here