What is IR35?

IR35 is the Intermediaries Legislation

The Intermediaries Legislation (IR35) was introduced on 6th April 2000.  HMRC state that the aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise:

  • For tax purposes, be regarded as an employee of the client; and
  • For NICs purposes, be regarded as employed in employed earners employment by the client.

The legislation is in place to determine whether a contractor is genuinely in business on their own account or whether they are in fact a disguised employee of their client and should be paying employed levels of tax and NI.

In April 17, the administration of IR35 changed dramatically for PSCs working in the public sector. Historically, the responsibility for determining an IR35 status has always rested on the contractor but from 6th April 2017, this changed. The public sector body now has to advise the Fee Payer whether the assignment falls inside or outside IR35. The Fee Payer is the company that pays the PSC, for example, a recruitment business. Where an assignment falls inside IR35, the Fee Payer must deduct PAYE and employee’s NICs from the PSC’s payment and pay these directly to HMRC. In addition the Fee Payer must pay employer’s NICs and apprenticeship levy to HMRC.

For more detailed information on IR35 legislation please visit the following link: http://www.hmrc.gov.uk/ir35/

 

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