IR35 is HMRC's policy to prevent employees leaving their permanent roles, setting up their own businesses and then returning to perform their old role as a contractor to avoid paying Tax and National Insurance at the higher rate.
This type of practice is described as 'disguised employees'.
It's essential that you act and work as a separate entity to your client to fall outside of IR35. You need to have a healthy business-to-business working relationship with your customer and there are many practices you can carry out when setting up your own company to strengthen this.
- Take out your own insurance policy against your company.
- Have the facility to work with many different clients without offering any type of exclusivity.
- Provide your company with it's own essential equipment and training.
- Maintain your own standards and not your clients.
- Take responsibility for your own financial risks.
- Have your own online presence.
- Have independent marketing literature.
Do I fall under the IR35 umbrella?
Are you unsure if your contract falls inside or outside IR35? Just forward a copy of your contract to us by email and we will take a look at it and advise you. We are based on Henleaze Road in Bristol and also welcome our clients to visit us for an informal chat to determine if you are affected by the IR35 policy.
I'm inside IR35, what happens now?
If your contract falls inside IR35 there are still many expenses you can claim back, these include:
- Travelling expenses
- Accommodation expenses
- Interest on the funds held within your own Company.
I'm outside IR35, what happens now?
If you are outside IR35, you can claim back any costs that are "wholly and exclusively" incurred to carry out the day to day running of your business. Such expenses include;
- Company insurance
- Expert fees (Including Accountancy)
- Travel expenses
- Motor expenses
- Computing hardware and software
- Telephone and mobile costs
- Stationery resources
Here at Elite Financial Accounting we often recommend a VAT Flat Rate Scheme can we extremely beneficial to your limited company for tax savings. Read a free guide on this here.
IR35 Factsheet