Intermediaries Legislation – IR35 in a Nutshell as HMRC see it

Intermediaries Legislation
Intermediaries Legislation

Intermediaries Legislation

IR35 is called Intermediaries legislation. It hit the statutes book in 1999.

According to HMRC IR35 catches you if:

o you come through an intermediary, i.e. your limited company, and

o you do exactly the same job as you would have done if you had been employed by the client as a permanent worker.

You would then need to pay the full tax as if you were an employee of the company.

Working Differently from Employees

For HMRC you have to be working differently than an employee would work.

For them you would have to have some control over where, when and how you do your work. You would have to have some financial risk like doing fix priced work or buying your own equipment. Or you would be providing a service that is not personal to you. That is you could send a substitute to do the work if you were not available.

Contractors Caught by IR35

HMRC would want you to pay IR35 tax:

o If your client tells you what to do and when to do it,

o you are given all your equipment and

o you have no financial risk and

o the work has to be done by you.

They would see you as being like any other employee of the company.

If you are given a specific project to do they would see you as being more likely to be outside IR35. However, if different tasks are allocated to you by the client then, for some reason, they would see you as being more likely to be inside IR35.

That’s what the Intermediaries legislation is all about. It would be best, for your financial health, to make sure you understand it. You should understand whether you are likely to be classed as inside or outside it.