All about Contracting and IR35
For a contractor, it can be challenging to deal with IR35, but it is necessary. You can find a lot of information regarding IR35. You must find how the legislation can affect your company, no matter how limited it can be. First of all it is important to define IR35. IR35 is an anti-avoidance legislation that targets Personal Service Companies (PSCs). PSCs were established by the government to fight off any “disguised employment.” If you have a contract that has the same liability, risk, control, and responsibility as that of a permanent employee, you would be considered or classed “inside IR35.” It means that you will be treated as a PAYE employee.
Its Effects on Your Business
IR35 has an effect on the way you run your business. If your contract is discovered to be within IR35, you won’t be able to enjoy the benefits from tax efficiencies. However, you can still find ways to operate your business and make the most money from it.
Determining If You Have the IR35 Status
A complex text determines your status by looking at your contract and checking on several factors:
Substitution: Is it possible for you to find a substitute if ever you won’t be able to come to work?
Direction and Control: This is the level of control the client has on your particular working condition.
Mutual Obligation: This is to check whether you have to complete a specific task or if there is a scope that will enable the client to request for additional workload.
Frequently Asked Questions about IR35
The following are some of the most common questions when you are contracting IR35:
How can I avoid IR35?
There is no way to avoid it if you are working through an LLC and receive dividends from its profits. However, there are several ways for you to comply with IR35. It would better to ask for professional assistance in this area.
Is this applicable to the private sector?
The UK government announced in 2017 that the private sector will also be subject to similar changes in the IR35. These changes will take effect on 2020, allowing the affected businesses to have enough time to prepare. A consultation is also scheduled on 2019 to fine-tune its alignment. The obligation if figuring out whether it is inside or outside IR35 and making sure that the exact amount is paid rests on the end hirer and the fee payer, which is likely to be the recruitment agency.
How long should a short notice period be?
A short notice period and at times no notice period at all means that your company has some financial risks in the contract. This means that the company might lose the assignment with not much of a warning. This is quite the opposite to what employees often experience. They are often given a lengthy period of time to terminate their employment. This simply indicates that you are being treated as a disguised employee of the client.
Questions will always abound around the issue about IR35 and its implementation. Make sure that you ask them to know your rights.