IR35 legislation is both complex and confusing, especially for the first time contractor. It is often the main concern of contractors. If you are inside of IR35 you will pay significantly more tax, than if you are outside of IR35.
A specialist IR35 accountant would be able to advise you on your IR35 status.
There is a large amount of good information on IR35 available from the internet, with sources such as the Professional Contractors Group IPSE being excellent, and well worth a look, plus they also have a list of IPSE accredited accountants who have specialist IR35 knowledge and experience.
You should choose an accountant local to where you are, as tax is complicated and it is always helpful to have local meetings.
There are many myths around IR35 which you need to avoid.
An IR35 accountant with specialist knowledge would help you avoid these.
Should IR35 concern you? The intention of IR35 was to prevent the Government losing tax revenue, by people allegedly avoiding tax by working through their own company (personal service company) whilst performing work in the manner of an employee.
IR35 refers to the intermediaries legislation of 2000. It was introduced to prevent people who would ordinarily be seen as employees by HMRC from being taxed as if they were self employed. It’s aim was to target individuals setting up as a contractor and working through a Limited Company.
An example that HMRC has cited is an IT specialist who leaves his permanent job one Friday and returns the following Monday as an IT contractor working through his own limited company. He is doing exactly the same work as before paying less tax and national insurance as he is taking his money by paying himself a small salary (on which tax and NIC is payable) and the bulk of his income as dividends.
To be outside of IR35, you need to carefully consider your contracts and working practices. A specialist IR35 accountant can help you with this. You need to be able to demonstrate to HMRC that you have control of how you undertake the task, show you are bearing financial risk, have the right to send a substitute worker and that there is no Mutuality of Obligation between the parities.
Your status needs to be reflected in both your contractual terms and the way in which undertake your contract.
There is a variety of information and misinformation around on the internet on IR35, so take care on who you believe.
There are few notable IR35 cases since 2001, and most refer to the fundamental tests around employment which are contained in the 1968 case Ready Mixed Concrete (South East) Ltd v The Minister of Pensions and National Insurance (1968). Most IR35 tribunals will use this case as a starting point. Notable IR35 cases are:-
August 2001 Battersby v Campbell, Dec 2001 FS Consulting Limited v McCaul, Oct 2002 Lime IT v Justin, Mar 2003 Synaptek v Young, Jan 2004 Usetech v Young, Jan 2005 Netherlane v Jones, Mar 2006 Cable and Wireless v Muscat, July 2007 Island consultants v HMRC, Jan 2008 MKM Computing Ltd, Jan 2008 Dragonfly Consulting Ltd, Jan 2008 First word software Ltd, Feb 2008 Larkstar Data, June 2008 Alternative Book Company Ltd, Jan 2011 MBF Design Service, July 2011 Marlen Ltd v HMRC, July 2011 Primary Path v HMRC, Dec 2011 JLJ Services v HMRC.
Freelancer Accounting are specialist IR35 accountants and can provide advice on IR35, and are accredited as experts in this area by the Professional Contractors Group PCG. Freelancer Accounting provides accounting and taxation services to contractors around London and the South East from their offices in London, Canary Wharf, Ricmond, Reading and Guildford.