IR35 Advice - The Facts
Where a person interposes a limited company between themselves and their employer, this company is known as a Personal Service Company (PSC). The benefits of this are that employer's NIC and employee's NIC can be avoided. The government became concerned at this and IR35 was introduced. The IR35 rules state that the PSC must be able to demonstrate that it has the "badges of trade" - otherwise the individual will be caught by the rules and will have to pay the same tax and NIC as all other employees.
In a tax investigation, the contract between the PSC and the contractor's recruitment consultant and the contractor's practical working arrangements will be a pivotal area. An IR35 review should therefore always be obtained for each new engagement.
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IR35 - Contracts and Compliance
If you can answer "yes" to the following, your contract may beat the IR35 rules but it will need other attributes as well:
- Does your company bear the financial risks of failure?
- Does your company profit from sound management in performing a contract?
- Does your company have the right to send alternative personnel?
- Does your company bear the risk of bad debts?
If your answer to the following is "yes", your contract may well fall foul of the IR35 rules:
- Is the contract a "Service Contract" rather than a "Contract for Services"?
- Are you entitled to sick or holiday pay?
- Is the relationship between you and your client one of "master and servant"?
But as we mentioned above, it will be your contract AND your practical working arrangements that will be under the microscope in an IR35 investigation. Protect yourself and ALWAYS get an IR35 Review for each new engagement.
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Want an IR35 Solution returning 82% of timesheets that puts you outside IR35?
IR35 - Who Decides If I Pass or Fail?
The rules place on the contractor the burden of deciding if a contract passes. If you can answer "yes" to the first set of questions and "no" to the second, your contract may pass. But you need to make sure your practical working arrangements pass as well. If you need IR35 advice in deciding if your contract and practical working arrangements pass, please visit our IR35 Contract Review screen. We offer a 48 hour contract review service which analyses your contract on a clause by clause basis.
If you register for our IR35 Solution you will not need to worry about contract reviews at all. These will all be done for you and you will be compliant with IR35 - but you will still retain 82% of your income!
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