Get To Know IR35

You may have heard of IR35 when you began looking into contracting and heard the horror stories of people either ignoring it or not being aware of its existence. If not dealt with in the proper way, you face hefty increases in tax at the end of the financial year. So it’s in your best interest to put a little research into what IR35 is, and how you properly address it.

Brookson bring you a brief guide on IR35 and ways you can ensure you aren’t caught in the trap.

What Is It?

IR35 is contractor specific tax legislation that was introduced in April 2000, with the sole aim of eliminating ‘disguised employment’. Which is being recognised as a contractor, with all the benefits that come with it, but all fully employed with a business. Gaining the positives of both worlds, such as guaranteed hours from employment and the ability to claim back expenses from contracting.

This means, some contractors were and still are in some cases, purposely avoiding normal PAYE tax and NIC’s, saving themselves and the company they work for, a lot of money. An obvious example would be an employee quits working for a company, only to return the following Monday as a contractor working under a limited company. Yet works the exact same role, hours and type of work. IR35 was created to stop people benefitting from this and is quite easy to avoid if you take the time. 

When Am I Considered an Employee?

This all depends on how the worker operates on a day to day basis, which would be reflected in the contract itself. Some common factors that are involved include:

• Are you working exclusively for a single client?
• Do you use your own materials?
• Do you have to rectify work at your own expense?
• Length of the contract you have
• The terms within that contract, notice period, hours of work etc.
• Any benefits similar to full-time employees (sick pay bonuses)

If you fall within these factors then you may be considered an employee by the Revenue, if so, you should seek to change the conditions of the contract or speak to a specialist contractor accountant for advice on what to do. 

How Do You Deal With It?

The best and most simple way of dealing with IR35 so that you don’t get a hefty increase in tax, is to speak to a specialist contractor accountant, such as Brookson. With years of experience and knowledge on contractor legislation, they’ll be able to look over your account and finances without you even having to deal with IR35 at all. This allows you to deal with the business side of contracting, rather than worrying about taxes.

from Young Upstarts http://ift.tt/2CixfFM via website design phoenix