Key points to understanding IR35

Here are some key points to understanding IR35:

IR35 and the Off-Payroll legislation target the engagements of limited company contractors who would be employees of their end-clients if they did not work through an intermediary such as their limited company.
As a limited company contractor, you pay slightly less tax than employees, although you also forgo the employment rights and security that employees enjoy.
HMRC is mainly targeting perceived loss of employer’s NICs, which firms do not pay if they hire contractors on a self-employed basis.
Employment status is not a choice but a matter of law and is defined by both the contractual agreement and the ongoing working practices.
If deemed ‘inside IR35’, you could suffer a reduction in net pay of up to 20%, either due to more taxes payable under the original IR35 or a reduced contract rate offered due to the Off-Payroll legislation.

It is important to work with the hirer and conduct your due diligence to try and secure an outside IR35 contract.
HMRC’s guidance does not always align with the law. Use independent specialists.
‘Control’, ‘personal service’ and ‘mutuality of obligation’ are the three key employment status factors which underpin all UK employment status cases.
Your hiring firm and agency share compliance responsibilities and tax liability risk under the Off-Payroll legislation. If you are deemed ‘inside IR35’ it is up to the agency or umbrella company in most cases to deduct and process your tax.
It is vital that you ensure your working practices match what is written in the contract and vice-versa.
Creating defence files helps to prove an ‘outside IR35’ status and shut down any future investigation.
During contract search and rate negotiations, it is reasonable to quote different rates for “outside IR35” and “inside IR35”.

If you wish to maintain your professional career as a contractor then Marcus Webb Associates can support you through the process.