If you are a sole trader working as a contractor for a company, it’s vitally important to be aware of the rules surrounding IR35. IR35 was first introduced by HMRC around the turn of the millennium and was designed to clamp down on tax avoidance.
Are you a ‘disguised employee’?
Contractors are able to work through umbrella companies or via their own limited company. Many contractors opt to work as a limited company and draw dividends, which can result in low NI deductions and tax. If an employee leaves an employed position with a company but swiftly returns to the business as a contractor doing the same kind of work as they previously were, HMRC may well see them as a ‘disguised employee’ and therefore charge them the same tax and NI as they paid when they were directly employed by the company.
How you could be regarded as ‘employed’
You may be taking risks if you are registered as a limited company but are working on one contract for a long period of time, or if you are not likely to suffer negative financial consequences if a job is not completed on time. You could also be regarded as ‘employed’ if you use the company’s equipment rather than your own, or if you don’t have the right to subcontract work out to someone else.
Get the IR35 advice you require
At One Click Ltd, we can come to your assistance if you need advice on your IR35 status. If your employer pays you by the hour, day, week or month, you may be seen as ‘employed’ by the company and could face tough penalties. The more control your employer has in terms of your work, the more likely you are to be regarded as ‘employed’, especially if they hand you a schedule of instructions each day.
Getting in touch
We can come to your assistance if you do require accurate, up-to-date and valuable advice on IR35 and avoiding HMRC penalties. To get in touch today, complete a contact form or call us on 0345 557 1287.