IR35 is the name given to the tax legislation in the Income (Earnings and Pensions) Act 2003. It applies when an individual, normally a contractor, provides their services through their personal services company to a client where they could be regarded as an employee of the client.
If the contractor is regarded as an employee the fee payer should make deductions for income tax and National Insurance Contributions on the fees to be paid to the intermediary and account to HMRC.
IR35 for the private sector came into force on 6 April 2021.
At present it is up to the intermediary to determine the status of the individual behind the service company. From 6 April 2021 the ultimate fee payer, so in most cases the end client company, needs to determine the status of the individual providing the service through the intermediary.
In the first instance, consideration should be given to using the online HMRC CEST (Check Employment Status for Tax Tool) to check status. There are also legal principles outlined below to consider.
IR35 does not apply where the services are supplied to small companies, ie a company meeting two or more of the criteria below:
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