What is IR35 and how does it affect me?

Another question we get asked frequently is what is IR35 and how does it affect me? What is IR35? IR35 is an off-payroll working rule and the purpose of it is to enable HMRC to determine whether a contractor or freelancer is a contractor or is an employee in disguise. How does IR35 operate? Essentially IR35 operates as a test for employment status. IR35 shows whether a contractor should be working as an employee or a self-employed individual. If you are an employee and qualify for IR35, there will be tax and national insurance contributions applied to your account by HMRC. If you are outside of IR35 due to being legitimately self-employed for the work carried out, you have less tax to pay. How are IR35 rules changing? Following a delay to the start of IR35 due to the COVID19 pandemic, IR35 will begin being enforced from April 2021 and the following will then come into effect - 1. It is now the responsibility of medium and large business to ascertain the contractor's employment status. 2. The contractor should then be informed of the decision through an official Status Determination Statement, which they have the right to dispute. 3. In the case of small business, it remains the contractor's duty to work out their own employment status. A small business is one that meets at least 2 of the below criteria for at least 2 consecutive financial years - 1. An annual turnover of no more than £10.2 million 2. A balance sheet total of no more than £5.1 million 3. No more than 50 employees If you have any further questions regarding IR35, please feel free to contact us directly.

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