If you fall within IR35 tax guidelines, it means that HMRC sees you as an employee in the ‘off-payroll’ working laws, for tax purposes. Here’s more UK tax advice on IR35.
What Does It Mean To Be ‘Inside IR35’?
In 2000, the off-payroll working rules were introduced by HMRC to make sure contractors, who would otherwise be employees, pay the same tax applicable to actual employees.
Simply put, if you are a contractor falling within IR35 you must pay income tax and National Insurance Contributions like any other employee would.
If your contract falls outside of the IR35 rule, HMRC will classify you as being self-employed and you pay tax accordingly. In order to determine your individual case, let us evaluate your status. It’s a fine line between paying tax and saving with claiming self-employed tax returns; after all its your hard earned money.
Who Determines If You Are In Or Out Of IR35?
It depends on your client and their standing in the public or private sector. Let’s see;
- Contractors in the public sector – then your end client must determine your IR35 status. Which means they work it out using HMRC’s tool to check employment status (CEST) or even an independent tax consultancy agent to work it out.
- Contractors in the private sector – in this case you determine your IR35 status. However, this rule changes by April 2020. Then larger clients and medium grade companies will hold responsibility for determining your IR35 status.
How Can I Determine If I’m Inside IR35 Status?
You can use HMRC’s ‘Check Employment Status Tool’ to determine if you are in or outside of the IR35 rule. In order to use this tool, you need the following information;
- Contract details
- Workers responsibilities
- Details on who decides on the type of work needed to be done
- Who decides; how, when and where work is carried out?
- How will the worker be paid?
Or you could let us help you, determine your standing. Contact us today, our tax consultants are ready to help!